Why Amazon bought a robot army

The company takes a page from 'The Jetsons' and picks up a fleet of robots to help fill orders.

By Benzinga Mar 20, 2012 5:32PM

Image: Amazon.com logo © EMMANUEL DUNAND/AFP/Getty ImagesBy Brett Callwood, Benzinga Staff Writer

Amazon (AMZN) said this week it is buying Kiva Systems, which makes robots that can fetch the products it sends out to customers.

Kiva's robots promise to make Amazon's already efficient fulfillment centers even speedier. They can grab products off of Amazon's warehouse shelves and bring them to human employees for packing and shipping. Rather than replace what Amazon already has, the Kiva technology will be added to the existing infrastructure.

Kiva's shareholders have already approved the $775 million sale. The deal is expected to close in the second quarter.

The following video shows how Kiva's robots work.

Post continues below.

Amazon has been rapidly expanding its fulfillment centers, trying to speed up the rate at which it fulfills orders. The increased spending has hurt its bottom line over the last year, but investors have taken those investments in stride.

The company operates roughly 2.5 million square meters of fulfillment centers in North America, which is a 67% increase from 2010. Internationally, Amazon operates another 1.64 million square meters -- a 71% increase.

Amazon has not commented on whether the new technology will result in reductions to its full-time or seasonal workforce.

In a research report published Monday, Goldman Sachs said that Kiva develops robots that locate individual items in a warehouse and then transports them (via portable shelves) to workers who do packing and shipping. The employees remain stationary on the perimeter of a facility, while the system of wirelessly connected robots move around the interior.

Amazon will likely roll this technology out to all of its fulfillment centers to improve efficiency and minimize headcount needed, Goldman analysts wrote in the report. Headcount increased 67% last year while revenue grew 41%, and fulfillment expense as a percentage of revenue increased to 9.2% last year from 8.2% a year earlier.

On Tuesday, J.P. Morgan said that Kiva could replace some workers in Amazon's fulfillment centers, but orders are likely to continue to require some human supervision. Adding Kiva could increase short-term capital spending, the analysts noted, but the company will likely see significant fulfillment savings over time.

Finally, Bank of America Merrill Lynch said that Kiva's robots reduce the need for fulfillment workers to walk, pick and pack inventory. That can improve worker productivity significantly. According to Kiva, Crate and Barrel achieved a six-fold improvement in order picking compared with traditional systems, the analysts wrote.

More from Benzinga:
Mar 20, 2012 9:22PM
Some big pharmacies use robotics today to get things done. As long as you keep the same item in the same place, it'll get it and bring it to you or put it back. I don't think it'll actually do the counting for you on little things, but it'll save time. Some big warehouses still use time and motion studies to get things done. The item is here. You should be able to walk it, get it/count it, pack it in X amount of time? If you continually don't make the time, they'll let you go. Automotive assembly lines use robotics also. One machine may do 30 welds all at the same time; BUT, somebody has to watch the machine, replace rods, etc. 
Mar 21, 2012 9:53AM
@Iron Mike

you really don't understand anything about economics. You want these types of jobs to go away, it makes products cheaper. Look at all the farmhand jobs tractor equipment got rid of. Did we suffer or become better?
Mar 21, 2012 9:44AM
If it means faster shipping, I'm all for it!
Mar 21, 2012 3:55PM

Well qualified for what? Picking up a box and moving it?

If you can be easily replaced by a robot, maybe it's time to look into a career change.
UAW, TAKE NOTICE: Remember when you represented SKILLED laborers?

You remember.............the painters.............the welders............the machinists.......oh, yeah, those jobs that couldn't be taught in a day..............the ones that let you have the employers by the short ones 'cause they couldn't find replacements in an hour?

Yeah........those jobs that already have been replaced by robots............LOL!

In less than a decade, it will be uncommon for a human to TOUCH an automobile while in the building process......................

Mar 21, 2012 2:25PM
My previous post was a joke, but I guess it was too subtle...

Of course automation is good for our economy. Although this world is far from perfect you can:

1) Fly half way around the world with amazing speed and at a decent price (no laughing please)
2) Video chat with multiple friends in different countries at the same time
3) Transfer funds and pay bills with a smart phone while walking your dog
4) Use GPS to guide you through unknown areas or cities
5) Watch your favorite sports team in HD, pause live TV, record, etc. with a DVR

None of this would be possible if we held on to a world that was entirely dependent on people doing things instead of automation. We often romanticize the way things used to be, while ignoring the huge advantages and luxuries we take for granted today. 

If you want to work 14 hour days on a farm, living with a family of 10 in an 800 square foot house with no air conditioning and a coal burning stove, then do it. 
Love to see those jobs so easy that ..............they would have to be unionized to take anyone doing them seriously, which is why they are so unskilled as to allow even today's simplistic robots take those jobs away.........HILARIOUS!

Mar 21, 2012 2:05PM

"They can grab products off of Amazon's warehouse shelves and bring them to human employees for packing and shipping. Rather than replace what Amazon already has (humans), the Kiva technology will be added to the existing infrastructure..."



What part of the above did people not comprehend?

Mar 21, 2012 9:59AM
Not sure if I will choose Amazon for my next purchase now knowing that they are taking jobs from the American people... especially in an economy where the unemployment rate is where it is. 
Mar 21, 2012 9:47AM
I think this is just a glimpse of what is to come - people being replaced and losing their jobs yet again. I guess when you make these decisions, you have to think of what's the best and most profitable for the company, but it takes the humanity out of it. 

So sad to see that this is our future and that we're losing even more jobs in this recession. 
Mar 21, 2012 9:46AM
I've always loved the ideas presented in the Jetsons. If Amazon helps us get closer to that world, more power to 'em!

@Iron Mike -- dude, robots don't "steal" jobs, they improve efficiency. It's not the same as outsourcing. If I send a job to China, it's gone. If I send a job to a robot, someone had to manufacture that robot! So we still get an American job out of it, provided the robots are made in the U.S. where they belong. (Or Japan, whose robots kick ****.)
Mar 21, 2012 10:28AM

Honestly, even though workers could potentially be laid off due to the Kiva acquisition, the speediness of shipments will likely get me to buy from Amazon more often. I really dislike waiting for things to arrive at my doorstep, so anything to quicken that process would attract me to that company more.


Some people criticize for not hiring people to do this job.   As long as the products the robots are handling are packaged correctly and are put in their proper places, the robots will handle it.    Most of the time this is human intervention. 




There is always a need for mechanics to fix the robots which can't fix themselves.

Mar 21, 2012 2:05PM

"They can grab products off of Amazon's warehouse shelves and bring them to human employees for packing and shipping. Rather than replace what Amazon already has (humans), the Kiva technology will be added to the existing infrastructure..."



What part of the above did people not comprehend?

Mar 21, 2012 9:44AM
It will be fascinating to see how many people lose their job over this.
Mar 21, 2012 2:10PM
how much stuff will these robots buy ????????????????
Mar 21, 2012 3:43PM
I don't purchase anything from Amazon anyway and haven't for years!  Why?  Because they sell products that promote animal fighting, potentially poached shark cartilage, anti-gay calendars, and more!  They have shown that their only concern is making a profit - by any deplorable means necessary.  Getting products quickly and cheaply is great...but not at the expense of my conscience.
Mar 21, 2012 3:16PM
We're already in a recession and now Amazon is taking away jobs from people who are well qualified... It's nearly impossible to be competing for this type of job against a robot. 
Mar 21, 2012 1:24PM

I wonder how many things well be broken by the bots?

A robot can function in many tasks, but how's it going to know the difference between one item and another item? Sight and the ability to tell he difference between one  thing and another are hard to duplicate with technology. Sure robots can do simple tasks over and over and much quicker than humans, but I don't know about this job of  filling orders.

Mar 21, 2012 1:57PM
Thanks for adding to the unemployment lines. BOYCOTT AMAZON!!!!!!!! Then let's see how much labor costs they save.
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