Amazon next step forward: Buying a massive robotics company

Amazon has announced that it is going to buy Kiva Systems for US$775-million, in order to help further automate many of the processes within its large warehouses. Kiva Systems develops a fairly unique robotic shelving system, where hundreds of mobile robots can plug themselves into various shelves and move them around a warehouse. In fact, the system is so advanced that shelves literally deliver products to the shipping department from around the warehouse as orders come in.

Kiva Systems was listed as one of the top 50 of the world’s most innovative companies by FastCompany earlier this year, where the company’s growing relationship with Amazon was highlighted in some detail. Amazon subsidiaries like Wag.com and Soap.com have been using fleets of Kiva robots inside of their warehouses for over a year now. But Amazon has not been alone in recognising how the robotic revolution can improve turnaround and reduce costs. Other major retailers including Toys “R” Us and Timberland have also adopted the technology.

Kiva’s technology tracks incoming orders and co-ordinates robots to sort shelves of inventory items in the time that an order is made. By the time the order has finished being placed, the items are in the shipping department and ready to be sent to the customer, without requiring any human intervention. Companies already using the technology have reported that the efficiency of the critters allows their shipping departments to ship up to four times as many goods within an hour. The company has also been adapting the robots to handle other tasks such as moving items to trash compactors and to help with packaging.

Dave Clark, the vice president of Amazon’s Global Customer Fulfillment department, states that “Amazon has long used automation in its fulfillment centers, and Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow.” No word on whether we are going to see some job-slashing in the fallout from the acquisition, but it is clear that using this new technology is certainly going to reduce the number of less skilled labourers required to keep Amazon’s shops pumping out goods at the rate that they do. That said, Kiva has an excellent reputation for bringing new jobs into the market.

Apparently Kiva Systems accounted for nearly 1 of every 10 000 jobs created in the US last year. Kiva claims that it creates all kinds of new job opportunities above its own skilled assembly technicians. Kiva believes that a new range of service technicians, software, hardware, and “firmware” engineers will all be needed to deal with its futuristic technology. Kiva, itself, added nearly 140 new employees in 2011, showing 80% growth. The company isn’t slowing down either, CEO Mark Mountz expects to continue adding about 10 employees a month throughout the year. It also looks like Amazon, in its usual style, is going to let Kiva Systems continue to function as normal. It will retain its headquarters in North Reading, Massachusetts, and will most likely continue business as usual.

The actual deal is only due to go through in the second quarter of this year. We are sure to see Kiva Systems technology making its way into Amazon warehouses in the second half of the year, so it will be interesting to see how automation at this level really affects a megalithic giant like Amazon. To put the money that Amazon is spending on this acquisition into some perspective, Kiva usually pitches its deals at around US$7-million per customer, but when you’re the size of Amazon upgrading all of your warehouses is probably going to cost you quite a bit more!