Amazon acquires Kiva for $775 million to bolster robotic workforce

kiva system robots

Robot’s whizzing by in-sync, in the place of human beings who would otherwise shuffle up to 15 miles per day. This will, in part, be the sound of Amazon’s future workforce thanks to Kiva Systems Inc., Amazon’s largest acquisition since its purchase of Zappos.com for $847 million in 2009.

The e-commerce giant announced its purchase of warehouse automation solution company Kiva for the entirety of Kiva’s outstanding shares, totaling $775 million in cash. The acquisition will close in the second quarter of 2012.

“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,” Dave Clark, Amazon’s vice president of global customer fulfillment, said in statement.

The intriguing story in this purchase is the capability with which Kiva will enable Amazon to automate and streamline the operation of its fulfillment centers.

Three years ago, Amazon was subject to criticism after the company was slapped with a lawsuit for failing to pay 21,000 workers for overtime. This followed an earlier exposé by The Times of London, which revealed unfair working conditions wherein Amazon employees were force to work nearly seven days a week.

Since then, rumors have budded of Amazon’s plan to soon open a retail store in the city of its headquarters, Seattle, WA. With Amazon’s expansion, evidenced by its $4.57 billion investment in order fulfillment just last year, Amazon is gearing up for an aggressive approach to claim its dominance as the go-to physical and digital retailer, with a clear emphasis on its speed, and an evident fear of falling behind the customer’s demands, as evidenced by its last annual report ending in fiscal year 2011.

“We believe that the principal competitive factors in our retail businesses include selection, price, and convenience, including fast and reliable fulfillment,” the report stated. “Additional competitive factors for our seller and enterprise services include the quality, speed, and reliability of our services and tools.”

Despite a workforce comprised of 56,200 full-time and part-time employees as of December 11, 2011, this number has been insufficient. To keep up with its growth, Amazon requires a tireless and long-term cost-effective workforce (i.e. robots).

The acquisition of Kiva was inevitable for Amazon, as the e-commerce company has clearly expressed the fear of failing to meet customer’s demands. Inadequate staffing and inefficient operations of its warehouses, comprised of a combined total of 44 million square-feet of space in both its North American and international warehouses, and the tracking of inventory on behalf of third-party vendors, are the major contributing factors.

As the video below shows, Kiva Systems Inc. is the brain behind inventory fulfillment, while its handler, who Kiva refers to as the “Human Pick Worker” is the muscle. While orders have traditionally been completed using conveyor belts that snake through the warehouses, every order that comes in is sent to a station, confirmed by the employee, which then signals a robotic “Drive Unit” (the orange robots) to pick up the corresponding items that need to be shipped. Think of it as a concerto of ants gracefully picking up shelves of items and automatically driving it to the human handlers.

While Amazon surely will find a work-a-holic helping hand, the human touch in warehouses appears to be waning. One day, machines may end up replacing the labor force altogether. Hurray!…

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