Amazon Acquires Kiva Systems

Mar 21, 2012 4:07 AM  By

Online behemoth Amazon acquired Kiva Systems for $775 million in cash — a deal which could see robotic technology playing a larger role in the company’s massive distribution/fulfillment network.

The deal is expected to close in the second quarter of 2012.

Kiva makes material handling systems (including specialized robots) that help automate fulfillment centers. Traditional material handling systems require human travel time to fixed inventory locations and repeated handling by multiple warehouse workers. The Kiva mobile fulfillment concept uses hundred of autonomous mobile robots and sophisticated control software. This system allows for faster cycle times with reduced labor requirements, from receiving to picking to shipping.

Warehouse workers remain in fixed locations on the periphery of the inventory storage area and the human touch points are reduced to a single handling of inventory at time of order fulfillment.

The Kiva system manages the picking process, including a critical scan to validate that the proper product has been picked for the any given order. The reduction in human touch points combined with strong system controls produces proficient order accuracy.

Kiva’s robots have been used by Quidsi (diapers.com) — which Amazon acquired in late 2010 – according to Amazon spokesperson Mary Osako. Osako says Kiva’s material handling technology improves productivity by bringing the products directly to employees to pick, pack and stow, and it helps fulfill customer orders faster.

“Kiva customers will continue to receive service and support after the transaction,” Osako says. “And we are still evaluating how and where we will use Kiva technology at Amazon.”

Lee Helman, managing director at investment firm Financo, says Amazon can implement Kiva Systems in all of its fulfillment centers.

Amazon uses its fulfillment centers not only for its own vast spectrum of products, but also for its third-party fulfillment service Fulfillment by Amazon.

Chris Kampe, managing director for investment firm Tully & Holland, says Amazon’s acquisition of Kiva is part of an investment program in infrastructure designed to increase distribution capacity and reduce the cost to pick and pack an order.

“What is unusual about this deal is that Amazon acquired Kiva, rather than simply license the product,” Kampe says. “This may lead one to believe they could make the technology proprietary in the future to give Amazon a competitive advantage over third-party fulfillment providers.”

Jim Tierney (jim.tierney@penton.com) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.