Amazon’s Robots and the Genius of a 44 Year Payback

“Kiva System’s Mobile-robotic Fulfillment Solution in action at Gilt Group’s Distribution Center in Shepherdsville, KY”PHOTO CREDIT: Dawghause PhotographyAmazon’s robots are getting flattering press.  And for good reason: they’re the cutest darned things.

Well, that’s not fair.  According to Amazon, these shelf-moving buggies eliminate picker travel in their distribution centers which means that wherever they install them, the buggies boost productivity from 100 units picked per hour to 300 units picked per hour.  Remember, this isn’t retail split case picking; Amazon contends with oodles of small orders (1 – 5 order lines) across an enormous SKU base.  So 300 units per hour is nothing to sneeze at.

Jeff Bezos promises to have 10,000 robots up and running, re-inventing distribution as we know it.  Or maybe not.  A few calculations with the statistics provided in the article might make you hold off on getting an army of KIVA robots for your DC.

  • Roughly 20 robots queue up to a picking station at any point in time. Let’s assume that for every 20 robots, another 10 are moving around the warehouse do receiving, putaway or retrieval tasks.  That means 30 robots for every picker.
  • 10,000 robots would support the work of 350 pickers (rounded up for easy reading).
  • 350 pickers picking at 300 lines per hour is the equivalent of 1,050 pickers picking at 100 lines per hour. So, Amazon’s robots have eliminated 700 pickers from the workload.
  • At $25,000 each per year, the 700 pickers had a labor cost of $17.5 million. That’s a lot of money, except…
  • Amazon purchased KIVA for $775 million. Even if we pretend there are no costs to produce a KIVA robot beyond that initial purchase price, the payback period at a clip of 10,000 robots would be 44 years.

Amazon boosters will tell me that I am missing the big picture; that a master plan of unearthly genius is at work; that these robots write poetry which they self-publish on Amazon further increasing their profitability.

Maybe.  Maybe the Jetsons cartoon really did capture the future of things.  But I find very few clients out there ready to wait out a 44 year payback period.

Automation, Blog, Capital investments, Distribution Center, Distribution center, eCommerce, Industries, Labor productivity, Payback, Productivity, Technology

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