The Economy Will Be Roboticized: Amazon Buys Kiva

by Andrew McAfee on March 21, 2012

Amazon has agreed to buy warehouse robot maker Kiva systems for $775 million (which is a lot of money).

As a research note from Barron’s states,

Kiva uses a series of computer-controlled robots to bring product to warehouse pickers rather than employees running the floor to find the same products. The systems appear to greatly reduce labor while concurrently improving order accuracy. Kiva also has a good base of existing users including Staples (SPLS), Gap (GPS) andWalgreen (WAG), potentially providing an alternative revenue source to Amazon in some form…

Unlike traditional pallet and shelving systems where employees seek products to fulfill orders, the Kiva systems use a series of movable-shelving systems that port products to the pickers. Because the process is automated, the shelf systems can be stacked side by side rather than necessitating room for continuous access. As a result, floor space can be used more efficiently. In other words, shelves do not need to remain accessible at all times since the robots can move them on an as needed basis.

I find it hard to believe that Amazon is buying Kiva only for its own fulfillment centers. It seems much more likely that with the purchase Amazon is getting deeper into the logistics business by offering warehouse automation gear.

It feels to me like we’re quickly heading into a business world in which Amazon is (in part) a logistics company, Google offers transportation automation services, Apple gets even deeper into entertainment, and so on. In short, it feels like the high tech giants are coming after the rest of the economy. As Marc Andreesen wrote a little while back in the Journal, “My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.”

We consumers should be thrilled by this. But should the rest of the economy be scared? I think so – do you? Leave a comment, please, and let us know.

Erik Johnson March 21, 2012 at 11:41 am

It would be nice to imagine that technology directors, some who once pledged to “do no evil”, are more prone than their predecessors to imbue their ever-broadening enterprises with a keener eye toward improving lives.  Unfortunately, buying Kiva positions Amazon to do the opposite with more effectiveness. 

I’m not an economist, but I feel like corporate competitiveness today relies on actually exacerbating social/economic imbalances.  Not only are wages falling, but consumption itself no longer adequately circulates money to other would-be consumers.  Its benefits notwithstanding, consumerism has certainly developed a destructive side which I’m hoping will one day be mitigated, ideally through democracy, capitalism, and culture.  I’m not holding my breath.

Amrutansu Das March 21, 2012 at 6:44 pm

software is eating out the world .

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bmldisp1001 March 25, 2012 at 7:04 pm

 I agree that a change like this feels negative towards workers.  On the other hand, this has been going on since the Industrial Revolution, or longer.  Did you really want to go back?

Prakash Dogra March 26, 2012 at 4:50 am

Classic case of a company having to decide whether the byproduct or enable of it “product” is “Actually” the product /service that generates revenue for it and creates a leadership position. I believe Amazon is a “good listener” to the market dynamics and emerging economic realities of cost considerations. We also “have a logisitcs business” might actually be the real winner for it in the long run. As a consumer am thrilled to see extensions that will provide a reasonable cost benefit and ensure quality of the service – logisitics – will improve across the industry – giving both direct and indirect benefits for the economy as a whole.

Richard MG Davies April 3, 2012 at 3:49 am

I think its reasonable for Amazon to make in-roads into Logistics. That said the economics of robotics is limited in the near term to countries with relatively high labor arbitrage. 

On the pros side, I imagine Amazon is interested in the Patents and the Innovation potential.

On the cons side, wld be the maintenence overhead of the robots, the infrastructure investment in the floors, the limitation imposed by the height of racking and speed of robots. 

Stock rotation and other advantages mentioned in the video wld be available through any Warehouse Management System, (WMS).

Marlon Feld April 9, 2012 at 3:15 pm

Amazon’s purchase of Kiva is potentially good news not only for consumers, but for innovators and entrepreneurs. Fulfillment could get easier for startups through logistics automation—which I’ll bet Amazon will offer primarily as a service, not by selling Kiva’s robots directly). This would be of a piece with Amazon’s public cloud, which makes it easy to get lots of server power going fast.

Amazon may be a Goliath, but at least they’re putting slingshots in the hands of Davids.

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