Before Amazon’s Drones Come the Robots; Retailer Begins Integrating Acquisition of Kiva’s Automated Warehouse Systems
December 10, 2013 Leave a comment
Before Amazon’s Drones Come the Robots
Retailer Begins Integrating Acquisition of Kiva’s Automated Warehouse Systems
GREG BENSINGER
Dec. 8, 2013 7:32 p.m. ET
Amazon.com Inc. AMZN +0.64% received a lot of news coverage for its sci-fi drone-delivery idea last week. But an immediate robotics effort under way in the Seattle retailer’s warehouses could save the company more than $900 million a year, according to an analyst.Amazon’s rollout of robots from a company it bought last year, Kiva Systems Inc., could help pare 20% to 40% off the $3.50 to $3.75 cost of fulfilling a typical order, said Shawn Milne, a Janney Capital Markets analyst. The robots can shuttle shelves full of merchandise to warehouse workers, relieving of the workers of having to dash throughout the warehouse.
“We believe this could be a significant opportunity to drive higher operating efficiency across Amazon’s massive fulfillment-center network,” Mr. Milne said in a research note.
Amazon has been working to reduce order costs and speed delivery, in part by constructing more warehouses closer to urban centers. While many of its latest efforts focus on deliveries themselves, Kiva robots could improve efficiency within warehouses, where humans—and human error—still rule the day.
Amazon bought Kiva in March 2012 for $775 million but only recently announced any incorporation of the technology in the online retailer’s warehouses. Amazon disclosed in its third-quarter earnings report that it has 1,400 Kiva robots in three of its warehouses.
“Amazon is very secretive, when they start talking about something, you better pay attention,” Mr. Milne said in an interview. He estimated that a broad rollout of Kiva robots could save Amazon $458 million to $916 million a year.
Amazon declined to comment.
Because Amazon warehouses are largely designed for workers who comb the aisles and pluck items off shelves, integrating the robots is likely a difficult proposition, Mr. Milne said. It could take several years for the online retailer to broadly deploy the robots, which look like large, orange versions of Roomba robotic vacuum cleaners.
Perhaps more tantalizing is the potential for Amazon to sell the robots to other companies, Mr. Milne said. Before Amazon bought Kiva, the robotics company was charging about $2 million for a kit of robots and as much as $20 million for large installations.
Meanwhile, robots will remain a source of fascination. Indeed, Amazon’s announcement of its drone-delivery idea appeared to have prompted Google Inc. GOOG +1.19% to discloseits effort to build robots.
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