OM in the News: Beyond Kiva–How Amazon Triggered a Robotic Arms Race
“An Amazon warehouse is a flurry of activity,” writes Industry Week (June 29, 2016). Workers jog around a man-made 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 hockey pucks, piled high with towers of consumer products.
Those are Kiva robots, once the marvel of warehouses everywhere. But Amazon whipped out its wallet and threw down $775 million to purchase Kiva in 2012. The acquisition effectively gave the firm command of an entire industry. And it decided to use the robots for Amazon and Amazon alone, ending the sale of Kiva’s products to competitors 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. The world’s biggest retailers, including Wal-Mart, Macy’s, and Target, have yet to populate their warehouses with widespread robotic systems. They rely on the old method humans: Hordes of pickers and packers who send boxes down conveyor belts.
It has taken 4 years, but a handful of startups are finally ready to compete with Kiva and equip the world’s warehouses with new robotics. Meanwhile, Amazon has about 30,000 Kiva robots at its warehouses across the globe, which has reduced operating expenses by about 20%. 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 them will save Amazon a further $2.5 billion.
About half the 856,000 U.S. warehouse laborers slog away on simple, arduous tasks that involve moving stuff around. It’s strenuous work, with employees often walking more than 12 miles a day. As new robots become available, particularly to e-commerce warehouses, these jobs will be at risk.
Classroom discussion questions:
1. Discuss Amazon CEO Bezos’ decision to buy Kiva.
2. Why are robots so important to warehouse operations?