- Amazon has to deal with dramatic swings in demand throughout the year, with 1/3 of the company’s yearly revenue occurring during the holiday season. How does Amazon handle the staffing of it “picking” operations to deal with the problem?
- The article seems to imply that the robots will help to alleviate this capacity problem. How will it help?
- Other than the robots, what other ideas do you have for how Amazon could relieve the capacity problem?
Amazon Robots Get Ready for Christmas
The Squat, Wheeled Machines Move Stocked Shelves to Workers
The orange, wheeled robots are the fruits of Amazon’s 2012 purchase of Kiva Systems for $775 million. Bloomberg News
Updated Nov. 19, 2014 7:29 p.m. ET
Amazon.com Inc. ‘s robot army is finally falling into place.
The Seattle online retailer has outfitted several U.S. warehouses with squat, orange, wheeled robots that move stocked shelves to workers, instead of having employees seek items amid long aisles of merchandise, according to people familiar with the matter.
At a 1.2-million-square-foot warehouse in Tracy, Calif., about 60 miles east of San Francisco, Amazon this summer replaced four floors of fixed shelving with the robots, the people said.
Now, “pickers” at the facility stand in one place and wait for robots to bring four-foot-by-six-foot shelving units to them, sparing them what amounted to as much as 20 miles a day of walking through the warehouse. Employees at some robot-equipped warehouses are expected to pick and scan at least 300 items an hour, compared with 100 under the old system, current and former workers said.
An Amazon spokeswoman declined to comment.
The robots are the fruits of Amazon’s 2012 purchase of Kiva Systems Inc. for $775 million. In May, Amazon Chief Executive Jeff Bezos told investors at Amazon’s annual meeting that he planned to deploy 10,000 Kiva robots by year-end, up from 1,400 at the time.
After the acquisition, Amazon stopped selling Kiva robots to other companies—Crate & Barrel and Gap were customers—to focus on developing them for its own needs. Primarily, that meant tweaking the software so the robots could move about a warehouse without running into one another or other objects, said one of the people.
At the heart of the robot rollout is Amazon’s relentless drive to compete with the immediacy of shopping at brick-and-mortar retailers by improving the efficiency of its logistics. If Amazon can shrink the time it takes to sort and pack goods at its roughly 80 U.S. warehouses, it can guarantee same-day or overnight delivery for more products to more customers.
The robots could also help Amazon save $400 million to $900 million a year in so-called fulfillment costs by reducing the number of times a product is “touched,” said Janney Capital Markets analyst Shawn Milne. He estimated the robots may pare 20% to 40% from the average $3.50-to-$3.75 cost of sorting, picking and boxing an order.
Amazon’s fulfillment costs have risen annually since 2009 and consumed 12.3% of net sales in the first nine months of this year, up from 8.4% for all of 2009. In October Amazon posted its biggest quarterly loss in 14 years amid rising fulfillment costs, which jumped 30% to $2.6 billion in the third quarter.
The robots could help Amazon meet demand during the holiday selling season, when it typically generates more than one-third of its annual revenue. The company was forced to offer rebates to some customers after delivery delays in December 2013. Still, Amazon plans to hire 80,000 temporary warehouse workers for the holiday season, up from 70,000 last year. It projects fourth-quarter sales will rise as much as 18%.
As part of its effort to speed orders to customers, Amazon has tested its own network of shipping trucks, enlisted yellow cabs for one-hour delivery and is developing aerial drones to drop packages at customer doorsteps. It is expected to open a Manhattan storefront for same-day package dispatch, returns and pickups.
People familiar with the matter said the Kiva robots have been deployed at warehouses in California, Kentucky and Texas, among others. The full list of warehouses using the robots couldn’t be learned.
At the robot-equipped warehouses, 20 or more shelf-toting robots may be lined up in front of a picker, these people said. Employees remove items from the robot-enabled shelves and place them in bins, which are whisked away on conveyor belts to other workers who box the goods, label the boxes and place them on trucks for delivery.
Kiva was founded in 2003 by Mick Mountz, a former executive at Apple Inc. and failed grocery-delivery company Webvan Group Inc. Mr. Mountz still oversees operations at Kiva.
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