- More than 250 self-flying drones are operating at Ikea's 73 distribution centers.
- Thanks to its partnership with Verity, Ikea has made progress with drones while its competitors lag.
- This article is part of "The Future of Supply-Chain Management," a series on companies' manufacturing and distribution strategies.
Three years ago, a drone took flight at an Ikea warehouse in Switzerland for the first time.
More than 250 drones now operate across 73 Ikea distribution centers in nine countries. They take stock of inventory and capture images of missing or misplaced items for detailed inventory reports — and they can do it all in completely dark warehouses.
For the past few decades, investors and large retailers like Amazon and Walmart have been interested in drone technology. Companies in the future-air-mobility industry — including firms that sell technology like surveillance and delivery drones and electric aircraft — have raised $22.4 billion from investors since 2004, according to a report published by the consulting firm McKinsey & Company.
But the drone hype cycle has recently cooled. McKinsey data found that total funding for the sector dropped in 2023, largely because retailers struggled with using drones to reliably and affordably deliver packages to people's homes.
Meanwhile, Ikea's largest franchisee, Ingka Group, has stood out for its steady progress in drone deployment.
Ikea's narrower application of the technology has focused on the company's internal supply chain, avoiding aviation regulations and production-related expenses that have ensnared its competitors over the years.
Ikea's strategic partnership with the drone startup Verity has been key
In 2021, Ikea partnered with Verity, a Swiss startup founded a decade ago that makes self-flying drones that scan inventory in large warehouses.
Verity's other clients include the Danish shipping and logistics company Maersk and the tech giant Samsung Group, though the Dutch-based home-furnishings retailer Ikea was its first customer.
"We wouldn't be here, where we are today, without their commitment to seeing this being an actual, working product," Raffaello D'Andrea, Verity's CEO and founder, told Business Insider.
Earlier iterations of Verity's drones weren't as accurate as they needed to be and could be too large for the needs of a warehouse. By working with Ikea, Verity advanced its technology and built drones that can more easily avoid other objects and perform warehouse inventory checks for out-of-stock items. The fleet of drones performs its tasks autonomously, meaning they can scan inventory and capture data without human control. They're more self-sufficient, too: For every 10 minutes that a Verity drone is in flight, it charges for 20 minutes.
They fly around gathering data throughout warehouses, performing standard inventory checks, and verifying if an item has moved locations, is misplaced on another shelf, or is completely missing from the company's inventory.
To do this, the drones are synched with Ikea's warehouse-management system, which contains data about the 5,000 to 8,000 SKUs, or stock-keeping units, on average in each location. Since items are constantly being moved around — from one place to another on the floor or out the door with customers — there's a chance that the system may not pick up on where every single item is located or how many items are in stock.
Verity's drones can double-check the system by scanning the barcodes on pallets stored in the warehouse and then comparing that data to what's in its warehouse-management system. If the data doesn't align, Ikea floor managers are informed via the drones' cloud-based software. This helps minimize the number of in-stock checks that Ikea's human workforce must complete, especially on higher shelves that may require extra work to reach.
Ikea's investments in Verity's drone technology fit into its broader strategy to explore and test newer supply-chain technologies. Ingka Investments, the investment division of Ingka Group, bought the supply-chain software provider Made4net last year to help Ikea grow online sales. In June, Ikea also joined investors, including Uber and Nvidia, in a $200 million funding round for the autonomous trucking startup Waabi.
Drone makers evolve through trial and error
Over the past few years, Ikea has added more drones to the company's operations, even as retail and restaurant chains lag behind in their drone applications for delivering food and packaged goods.
Nearly 11 years ago, Amazon founder Jeff Bezos made a splash when he told "60 Minutes" there could soon be delivery drones dropping off small packages from fulfillment centers within 30 minutes. But more than a decade and billions of dollars later, Amazon isn't close to what Bezos envisioned for the drone industry.
Similarly, in 2016, Domino's caught the industry's attention when it delivered the world's first pizza by drone in New Zealand. The company tried to revive the technology in 2022, but there's been scant mention of it since.
And earlier this year, Walmart and the drone delivery company DroneUp announced they would stop drone delivery in Arizona, Florida, and Utah to focus its service on the Dallas region. One big issue to sort out is cost: In August, DroneUp told Axios it cost the company about $30 to deliver one package by drone.
But the industry has also been encouraged by a friendlier regulatory landscape, as the Federal Aviation Administration in July cleared some drone companies to deliver packages without visual observers for the first time. McKinsey estimates that 1 million commercial drone deliveries occurred globally last year, up from 875,000 in 2022. Investors poured $4.5 billion into drone startups in 2023, a 9% drop from what was raised the previous year, though the number of funding deals more than doubled.
For years, D'Andrea has had a front seat to the hype cycle for drones and other autonomous robotics that aim to reinvent supply chains. Before spearheading Verity, he was a cofounder of Kiva Systems, a robotics startup that was acquired in 2012 by Amazon for $775 million and later became known as Amazon Robotics.
At the time, he thought that drone industry providers were really adept at making slick marketing videos that were "divorced from the technology required to achieve it." Billions of dollars were put into drones and other robotics that could move goods, but D'Andrea said he was unsure if those technologies could perform their tasks hundreds of thousands of times both reliably and safely.
However, Verity hasn't proved as expensive to build as delivery drones, D'Andrea said. That could be because warehouse drones that scan inventory are easier to design and develop than those meant to pick up packages and deliver them.
"But it's still taken us a long time to be able to get to where we are," D'Andrea told BI.
He said that investors have been receptive to Verity's pitch thus far. The startup announced a $43 million Series B last year, raising funds from investors including Qualcomm Ventures, A.P. Moller Holding, and Exor Ventures.
Ikea's cautious yet forward-looking supply-chain strategy
Erik Jönsson, an Ikea fulfillment support manager, said reliability and safety remain the company's top priorities for its drone strategy.
When drones are in flight, they buzz as close as 10 feet above Ikea employees, and they're never in the same space as customers.
Because of this cautious approach, there haven't been any human injuries related to the drones, Jönsson said.
Jönsson added that deploying drones has allowed employees to have more time for analyzing inventory data. Before using warehouse drones, workers would check thousands of pallets repeatedly in order to manage inventory. But with drones assisting, workers have more time to sort out order-related issues before they can affect customers.
Ultimately, this approach is in line with Ikea executives' vision for a supply chain with fewer inventory errors, which they believe will lead to a better customer experience, said Jönsson.