A Look At Amazon's (AMZN) Initiatives in the Field of Robotics

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The approach of, “It’s not humans vs. robots; it’s humans + robots,” has propelled Amazon to the forefront of automated warehouses. Amazon’s warehouses are so much more than storage places and thus have been aptly called fulfillment centers by Amazon. These fulfillment centers carry out multilayered tasks involved in fulfilling customer orders in an ecosystem of humans and advanced technologies, including robotics.

Here’s a look at Amazon’s (AMZN) initiatives in the field of robotics and how it’s becoming an integral part of its supply chain process.

Amazon’s journey into robotics began with its 2012 acquisition of Kiva Systems, a Boston-based leading innovator of material handling technology. The $775 million acquisition of Kiva marked Amazon’s second largest acquisition then and was a clear signal of its vision for the future. Dave Clark, vice president of global customer fulfillment for then said, “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.” Kiva was renamed Amazon Robotics in 2015.

Amazon runs more 175 fulfillment centers worldwide. There are different types of robots deployed at its fulfillment centers, which include palletizers (a type of industrial robotic arm), robo-stow, and the drive unit. Amazon has deployed 200,000 robotic drive units in its operations since 2012. During this time period, Amazon has added more than 300,000 full-time jobs globally, including positions in IT and in servicing and maintaining robots. According to Amazon, “the fulfillment centers that have robots often have higher employment numbers because inventory is moved at a faster pace, which requires extra associates.”

In 2019, Amazon acquired Canvas Technology, a robotics startup in Boulder, Colorado, which has built autonomous carts to move goods around warehouses. The acquisition of Canvas Technology is expected to further boost its robotic initiatives by allowing robotic units to move outside of drive fields and complete multiple tasks along with associates. Earlier in 2019, Amazon and BALYO entered into a seven-year commercial agreement. BALYO is a technological leader in the design and development of innovative robotic solutions for material handling trucks.

The use of robotics has enhanced the efficiency, speed, and safety at its fulfillment centers. The deployment of robots has substantially reduced physical effort for their associates, especially related to walking around the centers and lifting heavy packages for shipping or stowage. The robotic palletizers have lifted over 2 billion pounds of totes while robotic units named Pegasus and Xanthus are simplifying another challenging task of package sortation. These robots have been able to reduce mis-sorts by over 50% compared to conventional sorting system. With offerings such as same-day and one-day delivery with Prime, accuracy and efficiency in picking, packing and shipping become very crucial.

Amazon’s fulfillment centers expenses are part of its operating costs which stood at $40.23 billion in 2019 (15% of total operating expenses). Robotics has enabled a step change in how much inventory could be stored in its fulfillment buildings. The use of robotic units makes it possible to store 40% more inventory and, thereby, playing a crucial role in better utilization of its space. Going forward, Amazon plans to expand its fulfillment network “to accommodate a greater selection and in-stock inventory levels and to meet anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the fulfillment services.”

Amazon has been investing into its research and development (R&D) capabilities and is among the top R&D spenders. In November 2019, Amazon announced its plans to invest $40 million to build a new state-of-the-art Amazon Robotics innovation hub in Westborough, Massachusetts, which would create 200 tech and advanced manufacturing jobs. Opening in 2021, the facility will be in addition to Amazon Robotics’ current site in North Reading—together making the region as the company’s epicenter of robotics innovation.

Outside of its fulfillment centers, Amazon is testing fully electric, self-driving delivery devices to safely get packages to customers. Amazon Scout was introduced in January 2019. Its field testing began in a neighborhood in Snohomish County, Washington, and then was gradually introduced in Southern California by August 2019. “Amazon Scout has continued to operate during the pandemic and helped us meet increased customer demand by supplementing our transportation network,” said Sean Scott, vice president, Amazon Scout. Taking a leap forward, Amazon Scout’s field testing has recently started in Atlanta, Georgia and Franklin, Tennessee.

Amazon is the undisputed leader in e-commerce in the U.S.dominating 38.7% of the market share in 2020 (up from 37.3% from 2019) and is further projected to move up to 39.7% in 2021. It reported $280.52 billion in revenue in 2019, out of which 87.5% is from e-commerce equivalent to $245.5 billion. Amazon has featured on Gartner’s list for ‘Masters’ since 2015, which recognizes companies for sustained supply chain excellence.

Amazon’s supply chain is a core component in its undisputed leadership in e-commerce. The role of robotics and artificial intelligence (AI) in facilitating seamless operations is increasing each day. In the words of Brad Porter, vice president of Robotics at Amazon, at a 2019 MARS Conference (Machine Learning, Automation, Robotics and Space): “If we think of AI as the brain, then the heart of our operations is the symphony between humans and robots working together to deliver customer orders.”

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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