Space Logistics: The Next Frontier in Global Supply Chain

On April 20, 2023, SpaceX’s Starship rocket successfully launched, marking a significant milestone in the history of the nascent space economy. I know that most of the headlines were centered on the “intentional disintegration” that occurred 4 minutes after launch, but I don’t think that we collectively fully realize how big of a milestone this was for humanity or the United States. This colossal vehicle, five times the size of the space shuttle, boasts a capacity of 150 tons (a 787 Cargo plane has a capacity of 128 tons). While Elon Musk has a long-term vision of establishing human colonies on Mars, it’s hard not to think about the potential technological advancements we could see in the coming years. Shoot the first space age gave us the building blocks for things like cell phones, computers, GPS, and the internet. Undoubtedly there will be space tourism first class flights for busy executives, but one area I’ve been thinking about is terrestrial space logistics.

How did we get here? Brief History of SpaceX’s Journey

In early 2001, Elon Musk joined the board of directors for the Mars Society and presented his ambitious project, Mars Oasis, which focused on building greenhouses and growing plants on Mars. Initially, Musk sought to use Russian ICBM rockets for the project, but tensions between the US and Russia soured when the US withdrew from the ABM treaty. Faced with skepticism of his real intention from the Russians — needing a rocket capable of launching a nuke sounds like the excuse an 8 year old would come up with — Musk decided to start his own company to build reusable rockets. In the wake of 9/11 and the invasion of Afghanistan, SpaceX was founded in 2002 with a small group of engineers from neighboring aerospace companies in El Segundo, California.

At the time, Musk had just exited PayPal and was worth between $100-$200 million. Even if he put everything he had into SpaceX, this was a far cry from NASA’s annual budget of $14.8 billion in 2002. Was Musk serious or was this the delusion of someone with too much money?  Additionally, in 2002, it was believed that the space shuttle had solved the reusable spaceflight question, with the program continuing until 2011. 

Despite not having a functional rocket or a successful space launch under their belt, SpaceX won a $396 million contract in 2006 to resupply the International Space Station (ISS). It took two years before SpaceX achieved its first successful launch with the Falcon 1 rocket in 2008, at an internal development cost of around $100 million. Between 2006 and 2008, Musk, Tesla, and SpaceX faced numerous independent failures, and all three companies teetered on the brink of bankruptcy.

As an aside, imagine how history might have been different if Musk had walked away (broke) during the recession of 2008 and let Tesla and or SpaceX fail. 999/1000 people in his position would have chosen to walk away and save whatever portion of his $176M exit from PayPal was left. 

Bolstered by the government’s commitment to purchasing space flights from SpaceX, the company survived, and in late 2010, the first successful launch of the reusable Falcon 9 rocket took place. In May 2012, SpaceX successfully delivered its first shipment of cargo to the ISS. The company that made rocket ships  then began to resemble a rocket ship, winning more and more contracts from governments and private companies, earning a $44B valuation, and upending incumbent providers. In 2014, SpaceX had significantly reduced launch costs compared to companies like ULA, which had charged the government $400 million per launch compared to around $67M for SpaceX.

In 2015, SpaceX launched Starlink, a constellation of internet satellites aimed at commercializing SpaceX’s services. Starlink would later play a crucial role in supporting the Ukrainian war effort in 2022. In 2020, SpaceX sent two astronauts (Doug Hurley and Bob Behnken) into orbit, and by 2022, the company averaged an astounding pace of a rocket launch every six days.

A Matter of When, Not If

Given the pace of change and progress, intra planet space logistics is inevitable. If past performance is indicative of the future, we could be just 10 years away from cost-effective, repeatable space logistics. Here’s how I think it could work: 

To enable space logistics, our company (let’s call it SpaceXpress) will need a significant fleet of boosters, starships, and launch facilities spread across the globe. 

The cost of a Starship is currently around $1 billion, but let’s assume the price can be reduced to $500 million. As a point of comparison the current list price for a Boeing 787 is $248M. SpaceX is currently able to refurbish and relaunch a Falcon 9 every 6-8 days. Assuming that we are able to match that and launch each rocket every week, we would need seven rockets in rotation per spaceport, with an additional three as spares. That’s $5 billion in rockets per spaceport. Each booster costs around $40 million and has a useful life of 100 launches and we’d have to spend about $750M a year on new boosters. 

Now we need a place for the rockets to launch and land. The reality is that spaceports need to be strategically located, taking into account the Earth’s rotation, centripetal forces, and safety concerns. The best places for space ports are close to the equator (strongest centripetal forces) and all flights move from west to east (earth’s rotation). Given the enormous roar of a launch and the potential for something to go wrong, almost all space ports are on a coast with large bodies of water on their eastern shore. 

Potential locations for spaceports include Texas, Florida, Cuba, Puerto Rico, Panama, Venezuela, Brazil, Italy, Spain, Kenya, Somalia, Sri Lanka, Madagascar, Yemen, Oman, India, Vietnam, Indonesia, Malaysia, Philippines, Taiwan, Japan, and China. There are some pretty obvious locations here given existing supply chains and market sizes, but what is interesting is the potential for space logistics to transform some poorer countries into logistics hubs. 

SpaceX spent $100 million on their facility on the Gulf Coast of Texas, and UPS spent around $750 million on their Worldport facility in Louisville. Given that our space ports would need to double as sortation and logistics hubs, we can assume a cost of $1 billion per spaceport. To get started with our company, we’d probably need five spaceports located in Texas, Brazil, Italy, India, and Vietnam which would cost $5 billion. With $25 billion in rockets and an estimated $10 billion in launch costs, the total investment required for the infrastructure would be substantial.

Each spaceport would also require massive supporting infrastructure for non-space moves, such as airplanes, trucks, cross docks, and warehouses. To launch we would probably involve partnering with an established parcel carrier, but to be honest with current market caps let’s just add an acquisition of FedEx or DHL for $60 billion to the cart. 

I would imagine that we could use our network of Starships to cover moves of cargo for moves of around 10-15k miles between spaceports. As context, halfway around the earth is around 17k miles and starships are expected to be able to make this trip in just under an hour. An interesting development could be to have a constellation of smaller spaceports closer together (perhaps farther north and south of the equator) where the booster rockets with some small cargo capacity could land.  

So what’ll it cost? 

All in all, an estimated $109 billion (or a single Softbank Vision Fund) would be needed to fund SpaceXpress for the first five years, including:

Could someone please forward my GoFundMe page to Masayoshi Son? 

Obviously utilization of our assets will have a huge impact on the viability of the project and the costs we have to charge. Let’s assume we have sufficient utilization to justify the business.  SpaceX Starship has a cargo payload of 150 tons (compared to 128 tons for a Boeing 747), and Musk has suggested that a launch could cost as little as $10 million in 10 years. If that’s true, then this would equate to around $65 per kg in operating costs, and prices would likely need to be double that in order to amortize spaceports, rockets, and other expenses. Compared to current air freight rates (around $6 per kg), a 20x increase in price may be worth it in some situations. While the jet feed is one of the most expensive parts of any airfreight move, there are additional costs including fuel surcharges, security surcharges, container freight station/terminal handling charges, airport transfers, customs brokerage, pickup and delivery, cargo insurance, and accessorial charges.

Cool, but who is going to use it?

There is a reason that 90% of the world’s freight is moved via ocean. Cost is the overarching factor for most transportation decisions, but there are times when you need something, fast. Airfreight today is split between two types of carriers- express air freight (door to door moves handled by DHL, UPS, or FedEx) and traditional international moves where the cargo is split up across several flights or carriers. Most operators can recall a situation where it felt like they would pay literally any price to get something faster… well soon they may have the chance to make that tradeoff. 

There is a subset of clients like humanitarian organizations, researchers, or military customers who wouldn’t be price sensitive under the right circumstances. Imagine how quickly we could deploy food and aid to areas impacted by natural disasters or conflicts. Or how quickly we could share samples and research with labs across the world as we work on solving the next pandemic. In the event of a conflict, we could move resources and personnel nearly instantly. 

There are also a subset of goods where hours of transit could really make a big impact to the end user. Medicines, Human Organs for Transplants, or other highly perishable/time sensitive goods are good early use cases. 

Sometimes circumstances prompt a buyer to pay for speed. Think about a factory that goes down because of a broken machine, missing aircraft components, or high value electronics that are needed for an assembly line. Imagine ordering dumplings from Hong Kong from Ubereats via Space.

Technology will move faster than our regulatory framework

So how far are we from seeing Purple, Yellow, or Brown rockets? Even if the technology is proven the funding is secured, SpaceXpress will need to work through a few major hurdles. Regulatory frameworks and space traffic management systems will need to be established. Ensuring safe and efficient space transportation while minimizing the risk of collisions and debris will be a significant challenge.

The environmental impact of rocket launches is a concern, especially with regard to greenhouse gas emissions, noise pollution, and potential ecological damage. The industry will need to address these concerns and find ways to minimize its environmental footprint.

Achieving the goals of space logistics will require extensive collaboration between governments, regulatory bodies, industry partners, and research institutions. Building a global network of spaceports, launch facilities, and supporting infrastructure will necessitate international cooperation and partnerships.

The emergence of space logistics has the potential to revolutionize global supply chains by enabling rapid delivery of goods across vast distances. This could lead to a more interconnected global economy and significant improvements in the efficiency and resilience of supply chains.

Who wants to build a Space Company with me? 

Space logistics represents the next frontier in global transportation and supply chain management. Despite the significant financial and technological investments required, the potential benefits could be immense. The ability to rapidly transport goods across the globe could revolutionize industries and reshape the way we approach global trade. 

As SpaceX continues to break new ground in space exploration and reusable rocket technology, the possibility of a future where space logistics is a reality becomes more tangible. It may only be a matter of time before we witness the dawn of a new era in global transportation and supply chain management.