We feature a follow-up to our previous commentary related to Amazon and its announced “octocopter” drone delivery program.
Today’s Wall Street Journal features their follow-on article (paid subscription or free metered view) and provides some further insight regarding Amazon’s ongoing investment strategy in fulfillment automation. Readers will recall that 2012 announcement of Amazon’s acquisition of Kiva Systems for $775 million. At the time, there was lots of speculation regarding what Amazon had in mind regarding either the leveraged use or market sales of Kiva fulfillment center automation technology.
The WSJ article makes note that although Amazon remains rather secretive, its third quarter earnings report disclosed that it has 1400 Kiva robots quotes deployed in three of its fulfillment warehouses. An equity analyst from Janney Capital Markets is quoted as indicating that the Kiva technology “could help to pare 20% to 30% off the $3.50 to $3.75 cost of fulfilling a typical order..” The Janney analyst is further quoted: “We believe this could be significant opportunity to drive higher operating efficiency across Amazon’s massive fulfillment-center network.”
In our previous 2012 Supply Chain Matters commentary related to the acquisition of Kiva, we echoed that I was no secret that Amazon’s fulfillment centers are predominantly labor intensive and the leverage of Kiva’s robotic technology could greatly benefit Amazon’s long term fulfillment cost efficiencies. If the estimate of Jenney’s notion of 20-40 percent reductions in fulfillment costs comes to pass, it adds significance for any online fulfillment competitor to Amazon, since it is still unclear whether Kiva’s latest technology will be made available to the broader market.
Thus by our view, the Cyber Monday buzz regarding Amazon drones was not the real story to pay attention to. The Wall Street Journal and Amazon revelation of the deployment of Kiva robots is the far more important and relevant development for online and distribution center fulfillment in the months to come.