How Amazon Triggered a Robot Arms Race
An Amazon warehouse is a flurry of activity. Workers jog around a manmade cavern plopping items into yellow and black crates. Towering hydraulic arms lift heavy boxes toward the rafters. And an army of stubby orange robots slide along the floor like giant, sentient hockey pucks, piled high with towers of consumer gratification ranging from bestsellers to kitchenware.
Those are Kiva robots, once the marvel of warehouses everywhere. Amazon whipped out its wallet and threw down $775 million to purchase these robot legions in 2012. The acquisition effectively gave Jeff Bezos, its 52-year-old chief executive, command of an entire industry. He decided to use the robots for Amazon and Amazon alone, ending the sale of Kiva's products to warehouse operators and retailers that had come to rely on them. As contracts expired, they had to find other options to keep up with an ever-increasing consumer need for speed. The only problem was that there were no other options. Kiva was pretty much it.
It's taken four years, but a handful of startups are finally ready to replace Kiva and equip the world's warehouses with new robotics. Amazon's Kiva bots proved this kind of automation is more efficient than an all-human workforce. The new robots being rolled out look different, partly because the industry is still experimenting and partly because of patent issues. Some focus on picking items off shelves, others zoom around with touch screens. All are aimed at saving retailers money as they race to get their wares to your doorstep as quickly as possible.
Amazon has about 30,000 Kiva robots scuttling about its warehouses across the globe. Dave Clark, the retailer's senior vice president of worldwide operations and customer service, estimated the addition of the bots reduced operating expenses by about 20 percent. According to an analysis by Deutsche Bank, adding them to one new warehouse saves $22 million in fulfillment expenses. Bringing the Kivas to the 100 or so distribution centers that still haven't implemented the tech would save Amazon a further $2.5 billion.
“To be great in e-commerce, you need to be sophisticated inside the warehouse,” said Karl Siebrecht, chief executive at Flexe, which bills itself as the Airbnb for warehouse space. Amazon was the first company to confront the challenge of picking a virtually endless variety of goods from warehouse shelves and combining them in a single box for home delivery. Now that e-commerce is a growing part of the retail trade, more companies are paying attention. “The case for automation is building across the industry,” Siebrecht said.
But it's really only Amazon that has this kind of technology at scale, thanks in large part to Kiva. The world's biggest retailers, including Wal-Mart Stores Inc., Macy's Inc., and Target Corp., have yet to populate their warehouses with widespread robotic systems. They rely on the old method—otherwise known as humans: Hordes of pickers and packers who send boxes down conveyor belts.
For the new breed of robot makers, the potential market is wide open. Logistics companies that run their own warehouses started designing automatons while ambitious engineers saw the hole Bezos blew in the market and jumped in. One startup was even founded by former Kiva employees. The race to automate was on.
Saving money on parking lots
The modern warehouse is a rectangular box with 40-foot high ceilings, loading docks on both sides, and often, thousands of parking spaces for staff that swells during peak shopping seasons.
Lately retailers have been demanding something new: floors that approach the Platonic ideal of flatness, a feature that makes life easier for the technologists managing fleets of warehouse robots.
While automation has long been the looming threat to industrial workers, there's reason to think their situation is about to become worse. There were 856,000 warehouse workers in May, according to seasonally-adjusted data from the Bureau of Labor Statistics. The average wage for those workers is about $12 an hour, said David Egan, head of industrial research for the Americas at commercial real estate firm CBRE Group. Minimum wage hikes being considered and enacted nationwide could drive labor costs higher, especially in locations close to city centers—sites that are in high demand as retailers chase Amazon into the realm of same-day delivery....MOREPreviously:
Amazon’s $775 Million Acquisition of Kiva Systems Could Shift How Businesses See Robots
One Last Note on Amazon: How Many Companies Brag About the Number of Robots They've Added? (AMZN)
Mail.ru's Dmitry Grishin Doubles Down on Robotics With New $100 Million Fund
"Could Automation Be Labor Unions' Death Knell?"
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