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Amazon.com, Inc. (AMZN) Warehouse Drones Help Cut Operating Costs 20%

Amazon.com Inc (NASDAQ:AMZN)

Amazon.com, Inc. (NASDAQ:AMZN) is taking advantage of robotics. The retail giant, which has been at the forefront of this generation’s incredible tech advancements, has incorporated robots into its warehouse operations. And the results have been impeccable for the tech titan.

Amazon.com, Inc. Loves Robots at Warehouses

It’s only been two years since Amazon started to use robots in its warehouses. A few years ago, Amazon purchased Kiva for a whopping $775 million. The purpose of the deal was to improve inventory management and make operations much more efficient.

Amazon.com Inc (NASDAQ:AMZN) amazon

But the question is: has inventory management become a lot more efficient since then? Yep.

As of the third quarter of 2015, the website was utilizing 30,000 Kiva robots at 13 warehouses, doubling the number it had in 2014.

Citing a Deutsche Bank research note, Quartz reported that the “click to shop” cycle used to take at least one hour when it was in the manual hands of human employees. This is because they had to go through the stacks of inventory, select the product, pack the item and then ship it. With robots in charge, the same job takes just 15 minutes. That’s an incredibly short amount of time.

Operating costs, meanwhile, have been reduced by 20 percent, or $22 million, per warehouse.

When it comes to space, robots take up far less than human workers. This means that the warehouses can be designed or modified to have greater shelf space and less wide aisles.

If Amazon were to add the Kiva robots to the entire crop of warehouses (110) then the retail juggernaut could save about $2.5 billion. The one-time savings, however, could just be roughly $800 million because it does cost up to $20 million to install robots at each warehouse.

“In our vision for Amazon’s future fulfillment footprint, we see Kiva robots playing a much bigger role in improving efficiency if mega-fulfillment centers are deployed in Asia,” the bank’s analysts wrote in its research note.

Automation and robots could help Amazon continue to reign over its rivals. With labor costs expected to increase over the next couple of years, more tech firms could install the Amazon model. And one retailer has already slightly taken this idea from Amazon: drones.

Amazon.com, Inc.’s Drones Taken by Wal-Mart Stores, Inc.

It’s been known for quite some time that Amazon CEO Jeff Bezos wants to make drones a big part of its business model. He wants drones to deliver packages to the front door of households. Unfortunately for Bezos, he has come across resistance from the federal government as the Federal Aviation Agency (FAA) has prohibited commercial use of drones.

Rather than fighting Uncle Sam, Wal-Mart Stores, Inc. (NYSE:WMT) has decided to use drones in a different way: inventory management at its warehouses.

Wal-Mart is in the midst of adding flying drones to its warehouses. It’s looking to take advantage of drones for checking stock, determining if any product is running low or if employees need specific information on in-house products.

Akin to Amazon’s old warehouse problems, these kinds of tasks take humans quite a long time. For drones, on the other hand, it takes a fraction of the time. This is big news for Wal-Mart, especially as it tries to compete with Amazon in the world of ecommerce.

As Wal-Mart tries to cut down on costs and save some money, it may have to look at its warehouses.

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