Amazon.com informed on Monday that it has agreed to own the Kiva Systems Inc for a whopping amount of $775 million. Amazon.com will pay the total sum in cash and is expecting to leverage itself up to new heights, with the help of robotic technology owned by Kiva Systems.
The acquisition has been duly approved by the stockholders of Kiva and it is expected that the same will close in the second quarter of 2012. Amazon assented the same in a statement.
Kiva Systems is into the business of developing robots that zip around the entire warehouse, get hold of and move the crates and shelves of products. Thus with the help of this technology, Amazon can anticipate to fulfill the online orders quickly, without depending on much of human work force. Various companies who have already capitalized upon this technology are – Gap Inc, Staples Inc and Crate & Barrel.
Traditionally, Amazon has always used more human workers in its warehouses better known as the fulfillment centers, although in the recent times, various other ecommerce companies acquired by Amazon, like Quidal and Zappos have made use of the robotic technology provided by Kiva Systems.
Amazon has traditionally used more employees in its warehouses, or fulfillment centers as they are known. However, Kiva’s robots have been used by other e-commerce companies acquired by Amazon in recent years, such as Quidsi and Zappos.
“This is a way to improve efficiency,” said Scott Tilghman, an analyst at Caris & Company. “Given the scale of Amazon’s operations, it makes sense to have this capability in house.”
The effective functioning of the fulfillment centers is indispensable to the growth and success of the online business of Amazon. And in addition to their own operations, the company is also offering fulfillment center services to other online merchants, which makes it even more crucial for the Amazon to streamline the entire processes.
“Amazon has long used automation in its fulfillment centers, and Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow,” said Dave Clark, vice president, global customer fulfillment, at Amazon.com.
Recently it was observed that the spending of Amazon over its fulfillment centers has increased, as the company opened a lot of warehouses, in order to support the rapid growth of its businesses.
According to the analyst, Raymond James, the cost of maintaining and sustaining the fulfillment centers for Amazon, rose from 8 percent in the year 2010 to more than 9 percent in 2011.
“That’s been a big focus for investors recently,” Kessler said. “It’s a big cost. They are shipping so much and increasing volume so they need to figure out how to get more leverage out of these fulfillment centers.”