Amazon is the world's biggest retailer and its CEO Jeff Bezos is the world's richest man for one very good reason. His company is better than anyone else ever. At giving people what they want, quickly Amazon acquired its undisputed status as the heavyweight champion of the retail universe thanks largely to its lightning fast delivery times.
The astonishing feat of ferrying hundreds of millions of items from Guitar Strings to Saucepans to Car Parts directly to your door inside 24 hours is nothing short of a modern logistical miracle. So
How does Amazon deliver its parcels in 24 hours?
A super smart army of slave robots for one ingenious if occasionally unscrupulous management practices are part of the answer too and the modern day voodoo of deep learning AI all of which are made flesh in the most advanced stock rooms the world has ever seen. So join us today as we button up our Hybris jacket and journey inside Amazon's smart warehouses.
In the year to September 2020 with the global economy and the teeth of Coronavirus and the bleakest employment outlook in history Amazon reported global revenues of little under 350 billion dollars that's roughly double what it earned in 2017. By the way only three short years earlier not bad for a company which only started trading in 1994.
Amazon has built its empire on a platform of sheer unbeatable convenience for the end user. You, the customer need a product so you open the app or have a quiet word with Alexa and next day hey presto it's sitting on your doorstep. Moving products from A to B quickly is not easy compared with other modern technology giants which barely need to exist in the real world. Think of Netflix, Google or Facebook. Amazon needs to shift an astonishingly vast amount of sheer bulk safely precisely and quickly all day every day. So how does it do it?
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Last year a senior Amazon executive described Amazon's warehouses rather poetically as a symphony of humans and machines working together. How does this symphony actually work?
Let's take it from the top before you've even logged onto its website. Amazon has a fairly good idea of what you're going to buy this is all down to the semi-occult 21st century abracadabra that is deep learning AI which Amazon has been leveraging to incredible effect since around 2015. Put simply, an algorithm makes some assumptions about you based on your age location, socioeconomic background and purchase history. It will then hours days or even weeks before you actually log on ensure that your local warehouse is stocked with appropriate quantities of stock you're likely to consider buying. This might be a certain style of racy swimsuit that the algorithm anticipates will be the hot new must-have come springtime. It might be the paperback novel for a soon-to-go viral TV adaptation. In January 2020 for instance Amazon's algorithm correctly anticipated high incoming demands for face masks and well we all know what happened there so Amazon's smart warehouses also known as fulfillment centers not to be confused with their post office style sortation centers, very often know what you want even before you do or at least they know the very second you click buy now in the case of those wine inspired late night impulse buys. Once you've clicked, our symphony begins in earnest. You may have read headlines in recent years suggesting Amazon workers walk as many as 12 miles per shift darting about between shelves frantically picking up items. That's no longer quite true.
Amazon's modern fulfillment centers are largely patrolled by an army of Squat Roomba like robots that pick up whole shelves also known as pods and bring them to a human picker situated at a stationary workstation. Amazon's enlistment of this whirring battalion began in 2012 when the company purchased robotics company Kiva systems the market leader in warehouse automation for an eye-watering 775 million dollars cash. The company's flagship model commonly referred to as Kiva is around 30 centimeters high and capable of lifting 450 kilograms in weight whilst traveling at around 3 miles per hour. The substitution of these squat orange automatons in place of dashing human workers makes a colossal difference to Amazon's bottom line.
It's been estimated that Amazon's warehouses can now hold 50% more stock and retrieve that stock three times faster. This reduces the overall cost of fulfillment by some 40% cheaper. Quicker warehouses mean products that are more affordable for the end user and crucially products that are much more likely to be on the van driving down your street the following day. Amazon isn't about to stop there in a move that could be described as either ruthless or inspired upon purchasing Kiva. Jeff Bezos changed the name of the company to Amazon Robotics and told all previous Kiva customers household names like Gap, Walgreens and Staples they'd no longer be allowed to buy new Kiva technology. This of course gives Amazon an incalculable competitive advantage since rolling out the Kiva robot across its fulfillment centers by 2018 they had 100000 of them. By now that has comfortably surpassed two hundred thousand. Amazon robotics has been refining the design still further the new iteration of Kiva known as Pegasus is 10 centimeters shorter meaning more can be stopped on top and uses half the parts so it's cheaper to manufacture and maintain.
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Amazon says Pegasus can lift a hefty 600 kilograms and can be customized with a conveyor belt to work in the sortation centers where Amazon reports errors in delivery have been halved thanks to Pegasus. Naturally Amazon isn't quitting there, last summer it announced a newer thinner robot still called Xanthus and coming to a fulfillment center near you so
How do these Amazon Robots get around without knocking into each other all the time?
Cloud-based software operating what can fairly be described as an AI run air traffic control network coordinates the route of every single robot. This is all about optimization. What's the quickest route to get to a product that won't interfere with other robots on their own runs? What's the optimum speed acceleration and deceleration? As many as 800 robots can be deployed at any one time on the warehouse floor although in practice the numbers tend to be kept lower to avoid traffic jams.
When their batteries run low the robots are instructed to find the nearest charging station. Since robots took over the warehouses, changes have been implemented to improve their working conditions. Skylights for instance are now covered up so the robot's sensors aren't confused by glare. Air conditioning units that blow downwards in areas where humans work now blow sideways so as not to topple delicate items from the tops of moving shelves. To navigate a camera on the robot's undercarriage reads QR codes embedded in the floor and individual sensors help the robot slow or swerve to avoid obstacles in their paths compared with these scurrying warehouse servants some other robots working at Amazon look almost humdrum and conventional. The so-called Robo-stow robotic arm for instance wouldn't look out of place in an old-school car factory except it can lift a hefty 1200 kilograms and manipulate shipping pellets to within a tenth of a millimeter accuracy. There's also the labeling robots nicknamed slam machines by human co-workers for their relentlessly percussive racket. These can label up to one package every second and for a hint of what will happen in the coming years Amazon recently purchased canvas technologies a firm specializing in autonomous robotic carts. Just picture the most sci-fi drinks trolley you can imagine.
Robots of course are only part of the story inside Amazon's smart warehouses even the company's most fervent futurists admit the notion of complete automation is a decade away and even then probably won't happen. So what of the human side? Amazon's management techniques in concept with all that automation have made the business astonishingly lean and mean by historic standards. In 2016 it was estimated that by bringing everything in-house as opposed to all the duplication inherent in a standard high street or shopping mall. Amazon requires only half the employees a traditional retailer mine per 10 million dollars in sales what are all these humans hundreds of thousands across the world actually doing that.
Well since Kiva and its robotic airs took over, there's much less rushing around than they used to be but there's still plenty of tasks requiring dexterity and problem solving.
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The two most common roles still done by humans are stowing and picking. When goods arrive at the fulfilment centers, they're stowed by humans onto shelves or pods to be collected later by the robots. The pickers then pick the specific item from the shelves when the robots come by then send it on to be packed. Workers on the picking side are encouraged to work fast in order to maintain their so-called rate. If workers rate falls below expectations, employees can be disciplined and ultimately sacked. According to one ex-employee this rate can be challenging to fulfil 120 items per hour when they started at the company rising as high as 280 items per hour just three years later.
Errors are also punished. According to the same ex employee, workers were once permitted one error per 1000 items but now they're only allowed one per 2200. The rates only get more challenging during prime day when sales on Amazon skyrocket. One way Amazon encourages workers to make rates is through gamification or making the whole thing into a game. So instead of a plain old-fashioned graph telling workers where their productivity stands in relation to the rate workers instead play and compete on in-house games with names like picks in space mission racer or castle crafter so essentially the faster and more accurately employees pick stock the faster their little pixelated car moves around the track. Other incentive schemes such as in-house currency swag bucks reward hard work with Amazon branded merch such as water bottles or t-shirts.
Amazon has regularly found itself in the firing line for its intense working practices. According to reports as many as 14000 serious injuries occurred at Amazon sites in 2019, a per employee rate of nearly double the industry standard. Deaths are infrequent but not unheard of. In the UK alone, during the three years to 2018 ambulances were called to Amazon warehouses 600 times for its part Amazon is keen to stress it invests tens of millions of dollars into workers safety awareness programs but there's no denying injuries spike around prime day so are Amazon's ultra efficient warehouse is ultimately a force for good while Covid 19 laid waste to vast swathes of the conventional retail landscape. This year Amazon has been processing up to 40% more orders than expected in the month leading up to March 23 alone.
Toilet paper sales increased 186 percent. Sales of cough medicine skyrocketed 862% and children's vitamins went up 287% plainly in a world where going to the shops can be a risky business. Amazon is fulfilling a need and as such ever greater numbers of people are relying on it.
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Will the robots steal our jobs then the outlook is unclear but within Amazon it's plain to see that humans are still needed for many aspects of the work and even if robots can one day stow or pick as fast as humans; Dealing with many crises like leaking paint pots on a fast-moving conveyor belt or identifying ripe bananas on site will still need the human touch for some time to come. Whatever the future brings, Amazon's new 40 million robotics lab just outside Boston for instance or its tantalizing patent for airship like floating fulfillment centers one thing can be guaranteed as long as we're all buying, Amazon will keep on delivering.
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