Amazon (AMZN, Financial), known to be the pioneer in e-commerce, has set yet another example for the world of ecommerce to enhance customer experience in rush hours and reduce costs at the same time. A leader in true sense can be identified by such path breaking initiatives and that is why despite tough competition from all quarters, Amazon is still the undoubted leader in the ecommerce world. Even though Alibaba (BABA, Financial) enjoys the edge of having the largest population of the world as its home crowd, and likewise, Flipkart enjoys the second largest home crowd yet, Amazon adorns the position of the global leader since it made the whole world as its home turf with new innovations in its operations.
Recently Amazon has started the use of robots and robotic technology at it warehouse, and after the success with the robots, it is now increasing the robot population at its warehouse, not only as a cost cutting measure to stay ahead of competition in terms of numbers, but also enhancing customer experience by ensuring on time delivery for the heavy traffic festive season shopping. Let us take a closer look at what is happening at the backyard of Amazon.
Amazon Warehouse
Amazon.com has installed more than 15,000 robots across 10 U.S. warehouses; a move that promises to cut operating costs by one-fifth and move packages out of the door more quickly in the run-up to meet the Christmas shipment rush.
The orange 320-pound (145 kg) robots, which scoot around the floor on wheels, speaks aloud of how Amazon intents to make its shopping experience more hi-tech by adopting technology developed by Kiva Systems, a robotics company it acquired for $775 million in 2012. Amazon showcased to media on Sunday ahead of Cyber Monday, the biggest online shopping day of the year.
The robots help in moving items from the shelves in the warehouse for packaging and then finally to the shipping desk to be collected by the shippers. This warehouse automation helps the U.S. online retail giant in expediting order processing in the backend and reduces the turnaround time of delivery to customers and helps the company compete with brick-and-mortar stores, where the bulk of Americans still do their shopping.
The robots will also help Amazon avoid the embarrassment and mishap of last year’s holiday season, when a surge of packages overwhelmed shipping and logistics company United Parcel Service (UPS, Financial) and delayed the arrival of Christmas presents around the globe. Amazon had to take a huge financial hit in offering shipping refunds and $20 gift cards to compensate customers affected due to the logistic failure.
Amazon introduced the robot system just a quarter ahead of the festive season, during which it does almost one third of its annual business. The updated warehouses are in five states — California, Texas, Florida, New Jersey and Washington.
The Robotic Facts
The new tech initiative does come at a reasonable cost for Amazon. The ecommerce giant estimated in June 2013 that it would spend about $46 million to install Kiva robots at its warehouse in Ruskin, Florida, including $26.1 million for the equipment, according to company filings to local government.
“The Kiva robots have really seems to mobilize stock movement of Amazon to a great extent. It allows Amazon efficient usage of space in the warehouse by allowing 50% increased storage space and shorten the time it takes to offer same-day delivery in several areas”, said Dave Clark, senior vice president of worldwide operations and customer services.
“At Amazon’s warehouse in Tracy, California, workers stack goods in shelves carried by more than 1,500 Kiva robots, which use markings on the floor to navigate and form a big block of inventory,” Clark further added.
Aligning the storage racks closely together eliminates the need for workers to navigate aisles to collect items ordered by consumers. Now the store personnel just need to call for the item and the robot steers itself to their particular work station. Each robot is able to carry around 720 pounds of load. The robots have proved to be 15% more efficient in terms of speed than human workers at warehouses. Going by the warehouse reports a robot takes only thirteen minutes to mobilize inventory to the pickup desk while it takes one hour and thirty minutes for the same process operated by human hands. Hence the automation at the backend is really working well for Amazon especially during peak traffic by reducing inventory mobilization time and increasing space for more inventory storage.
“It’s certainly proving out that it’s justified itself,” Clark said of the Kiva acquisition. “We’re happy with the economics of it.”
Final Take
The Kiva acquisition seems to be paying well for Amazon that’s working towards making this Christmas season a much better one compared to the earlier year. This year, Amazon wants to improve customer satisfaction and gain traction in the market during this holiday season through the use of robots which are reducing the time lag between placing an order and the final delivery considerably for the e-commerce giant. Let’s stay hooked to the sales of Amazon during this Christmas season to decipher the true essence of building robots to make the merry season happier for the customers.
