Robots Are Speeding the Process of Getting Online Orders to Your Door
By Will Craig
Capital Group Analyst
If you’ve ever wondered how an online order makes its way from Amazon.com to your doorstep, I can tell you firsthand that it’s becoming a joint venture between man and machine. I’ve toured two of the retailer’s warehouses and gotten a glimpse of this evolving behind-the-scenes process. When I visited the first facility two years ago, I was struck by both its enormity and by the assembly-line precision with which it shipped thousands of items a day.
I was just as impressed with those things when I toured another facility a few weeks ago. This time, however, something else stood out: the 5,000 robots that Amazon is using to speed delivery of everything from books to bungee cords. Aside from the fascinating experience of watching robots whirl around in what felt like a choreographed dance, my visit provided valuable insight into what is likely to be a key component of the company’s future.
The increasing deployment of robots in coming years has the potential not only to improve Amazon’s customer service but also to keep a lid on the company’s expenses and ultimately boost its profitability. Warehouses have long relied on armies of human “pickers” who pluck goods from shelves and deliver them to “packers” who box up the items and ship them to customers. Though retailers have always needed to run their warehouses efficiently, that’s more important than ever in today’s world of perpetually shifting consumer tastes and retail trends.
Amazon made a big commitment to robotics four years ago, when it bought a leading manufacturer of the devices. The machines are notable for both their sophistication and for how substantially they boost operating efficiency. In fact, Amazon’s robot-equipped warehouses are 50% more productive than its traditional facilities.
Amazon has not disclosed how many of its existing warehouses will be converted to robot usage or how quickly the change will take place. Thirteen of the company’s 123 warehouses are now robot-enabled, and it’s likely that many current and future facilities will center around this automation. Given the sheer size of Amazon and the significant productivity boost involved, greater automation could have a meaningful effect on the bottom line. For example, the presence of robots may in some cases allow Amazon to avoid building warehouses it would have otherwise needed — a substantial cost savings.
Amazon warehouses are larger than almost anything you can imagine.
As a native Texan, I am accustomed to big things. And I drove a forklift during summers in high school, so I know my way around a warehouse. But neither of those experiences prepared me for the magnitude of an Amazon facility. Both the Delaware complex I toured two years ago and the Fort Worth, Texas, center I viewed recently are more than 1 million square feet. When you stand at one end of the building, it’s impossible to see the walls on the other end because they’re so far away.
Several things are noteworthy about Amazon’s robots. The first is that they don’t look anything like the conventional image of a robot. In other words, there’s no human shape with a head, torso and flailing arms. Instead, they’re closer in size and appearance to small, self-propelled vacuum cleaners. But these units are bright orange and have Herculean strength. Each robot fits under a shelving unit. When a worker needs a product, the machine lifts the entire shelf of goods weighing as much as 1,000 pounds. It drives to the worker, who grabs the needed item from the shelf. The machine then returns to its position. Needless to say, the warehouse is a constant swirl of activity that showcases impressive logistical sophistication. Simply watching the robots spinning constantly and seamlessly is a sight to behold.
Surprisingly, robots have not led to a smaller workforce.
Before my visit, I assumed that robots boosted productivity by taking over activities that were previously done by humans — in other words, by trimming the workforce. But that’s not the case. The Texas warehouse employs as many people as a traditional facility — 3,000 to 4,000 in non-peak periods and 6,000 to 7,000 during peak times. Although the machines perform some tasks that were done by employees, the total head count is similar because scores of engineers are needed to oversee the robots.
The added efficiency comes from the fact that robot-equipped buildings can hold up to 50% more inventory in the same amount of space. How’s that possible? Because the robots — and, hence, the shelves — are mobile, there is no need for the wide aisles that traditional warehouses must have so that employees and forklifts can get through. In fact, there are relatively few aisles in the Texas center. When a robot is summoned, the others in its row simply glide out of the way. It’s like a parting sea: a dozen machines may move so that one can get out. Then the sea closes up again. The warehouse space that would otherwise be designated for aisles is instead allocated for many more rows of inventory.
As robotics evolves, the next generation of machines may be able to pick and pack items with much less human intervention. Equipping machines with Jetson-like fine-motor skills has long been a technological challenge, but I believe Amazon will eventually master it. That would be another milestone for a company in relentless pursuit of operational efficiency.
Will Craig is an equity analyst who covers e-commerce and online advertising. Based in Los Angeles, he has nine years of investment experience and has been with Capital Group since 2011.