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Mr. Gilmore serves as Chief Editor of Supply Chain Digest. He is confident he has written more words about Supply Chain than anyone else in history.

Gilmore's Supply Chain Jab

By Dan Gilmore, Editor Supply Chain Digest

January 31, 2013

Supply Chain Comment: What is Amazon Going to Do with Kiva?

To Get Maximum Result from Show Like ProMat, Exhibitors Need to Talk Benefits and Differentiation - and have a Booth that Makes it Clear what They Do shocked the materials handling world early in 2012 when it announced it was acquiring Kiva Systems for an astounding $775 million. Kiva was the inventor of an innovative robotic order picking system, in which AGV-like orange robots move inventory on carriers to deliver product to pick stations.

Kiva customers included Staples, Crate & Barrel, and a few other dot com sites that Amazon later acquired, such as Zappos and

Gilmore Says:

This would be consistent with my theory that Kiva is not selling to others now simply because there is no capacity to deliver to anyone beyond Amazon's own needs immediate plans and needs.
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There were two surprises in this transaction: (1) the enormous price Amazon paid for a company that had a relatively few number of customers and annual revenue that was a small fraction of the purchase price; (2) that Amazon would buy a supply chain technology provider. The small history of such strategies - companies buying technology vendors - is not encouraging, for all kinds of reasons.

The fact that Amazon followed up the acquisition with a deafening silence as to its plans, not only at the time but over the course of the next year, naturally led to much speculation. For awhile after the deal was announced, Wall Street analysts during Amazon's quarterly earnings calls would ask about the company’s intentions for Kiva, but the answer was always "we'll let you know as soon as we're ready."

In the Q4 earnings call held earlier this week, there was not any discussion by Amazon about its Kiva plans, or question about it from the analysts. I think they have forgotten about the subject for now. I think I will get on the Q1 call in three months and ask myself.

All this naturally led to speculation in many quarters that Amazon would not sell the technology to others, for competitive reasons.

There were riffs on that. I suggested that given the nearly 100 distribution centers Amazon has globally, rolling out Kiva's technology to those facilities would simply totally consume the manufacturing and implementation capacity of Kiva for a number of years.

Another logical thread was that Amazon was analyzing how much competitive advantage the Kiva system might give it, and therefore did not want major competitors such as Walmart to have these capabilities. Frankly, seeing what Amazon is doing, that would include almost every retailer.

This past summer, an ex-Kiva employee told SCDigest that "to date Kiva had made about 6000 robots in its history. Amazon is ordering 18,000 for its own operations. And Amazon is hiring production and project management people like crazy for the Kiva operation."

This would be consistent with my theory that Kiva is not selling to others now simply because there is no capacity to deliver to anyone beyond Amazon's own immediate plans and needs.

But maybe that will change. After missing ProMat this year, word is that Kiva once again grabbed some prime real estate for the ProMat 2015 show, in a process that as usual took place during the middle of this year's show. (ProMat is a bi-annual event.)

So, a logical line of thinking is that:

1. Amazon's needs for the next couple of years will totally consume Kiva's capacity to deliver.

2. Given that, there is no need to spend any money marketing the solution now.

3. That by 2015 that backlog will have been worked through at least in part, and Amazon will be able to sell the Kiva system to others, so the marketing recommences.

Now will Amazon sell Kiva to say Even if my theory above is true, that is a whole other question.

There is one other wild card possibility, of which other rumors have been floating. That is that Amazon really views the Kiva approach as a lynch pin in aggressive plans to further build out its third party fulfillment business for other retailers and manufacturers.

If so, is it possible the Kiva space reserved for ProMat 2015 will really be used to market those capabilities, using a working display of Kiva robots to show just what Amazon could do for you in fulfillment?

While I still favor my theory, this last one actually makes more logical sense, as given Amazon's size ( $61 billion in 2012 revenues, growing 20+% plus each year) it would be almost impossible for Kiva by itself to make much of an impact on the company's revenue or profit… Unless it was by powering its third-party fulfillment business.

Owning something like Kiva and operating it like any other material handing company would simply be a distraction for Amazon in the end, which is why many of us questioned the sense of the deal at the time. I would bet any money that under that scenario Amazon will spit it back out or sell it off in the end.


But if the goal is 3PL dominance, then a lot of this suddenly makes sense, and Kiva becomes core, not a distraction.

Let me know your thoughts at the Feedback section below.

Recent Feedback

In the small world that is supply chain solutions, I too have heard many of the same prognostications that you have.  It should be noted, Kiva actually selected prime booth space for Modex in 2014, so the timeline to commercial re-engagement is much shorter it seems.  I wonder, though, if they selected booth space for Promat 2013 and backed out of it, so are just maintaining the selected space 'in case' they want to be at Modex.    Two new things I heard at Promat.  First, there's been a battery life concern on the existing installs, delaying some progress in Amazon rollouts.  I only heard this from one former Kiva employee, and no installed customers, so I'm not sure of the accuracy of the claim, but he did use the term 'dropping like flies'.   Second, a couple of sources told me the pending resolution of the FTC concerns by Target, et al, was the dropping of the cessation of support within 18 months for non-Amazon Kiva customers, and the building of an operational firewall between Kiva Amazon and Kiva Other.  If true, that one may lend some credence to the reentry into the market of Kiva outside of Amazon installs.


Bob Carver
Vice President
Best Way Technologies
Feb, 01 2013

The secret might lie beneath the reason the Kiva technology was founded in the first place. Go back to the stories that Mick Mountz tells as to why the drastic change in the warehousing methodology needed to be done in the first place and why that "bring the warehouse to the picker" model was required.

If you couple that with Amazon's rampant building of metro-area physical warehouse space, the answer just might unfold.

If the premise that this is the only technology to accomplish that goal, then as Amazon wants to take it off the market. Hence, I buy the company versus buy their products, so no one else can do what I am about to do.

Greg Aimi
Director of Research -- Logistics
Feb, 01 2013

Considering the amount of work ahead for Kiva to implement its system across all the Amazon DCs, I assume Kiva will continue to simultaneously innovate and invest in R&D so if and when the time comes to re-market itself in the future, it is still a competitive player.

Rishabh Singhvi
Project Manager
Self Employed
Feb, 06 2013

This is the most logical assessment of Kiva's future that I've read to date. There's too much rumor-mongering going on around this topic - it's nice to read some facts and intelligent speculation for a change.

Ian Hobkirk
Managing Director
Commonwealth Supply Chain Advisors
Feb, 11 2013

Thank you for your interesting insights into the Amazon/Kiva acquisition. I am asking myself similar questions but from a personal point of view it seems to me that Amazon has all that time been out there to occupy the critical logistical link to supply any form or shape of goods to end consumers and to make this their field of expertise. Why else would they continue to build DCs like there was no tomorrow. With commerce developing increasingly into multi-channel with one channel being manufacturer-direct-to-consumer it appears that some industries need to take decisions where to play and what their core expertise should be, e.g. pharmaceutical companies will possibly have to take a pick and opt for higher R&D spends to protect their future, choosing 3PLs for their distribution instead of running warehouses themselves in an increasingly regulated environment. Amazon is experimenting with temperature controlled delivery already (grocery), which would be equally relevant for pharma products so they could possibly take over this business. As they act as an integrated provider that can even offer a web front end and a shop platform they appear to be very well postioned to take away business from other less vertically integrated 3PLs. In order to be competitve with their high investments into DCs they obviously need to be very efficient in their warehouse operations which so far are highly labor intensive especially in picking eaches (B-2-C). Whether Kiva really is a viable solution or not is yet to be proven but they obviously believe so. It is questionable whether logistics competitors of Amazon would buy a Kiva solution from their key competitor and as far as I am informed a few potential Kiva customers cancelled their orders when they got wind of the change of ownership.

In conclusion, I think Amazon is firstly trying to establish whether Kiva can give them a competitive edge in terms of cost/accuracy in B-2-C logistics and if that is the case, position themselves as an integrated 3PL instead of trying acquire customers for Kiva. This would play into your wild card option.

On another notion, how familiar are you with the automated material handling market as such? I am trying to ascertain market sizes, regional split and investment volumes/OPEX ratios. If you are able/willing to exchange views on this or provide some insight, I would be more than happy.

Dr. Sebastian Reschke
Sep, 04 2013

I have been following KIVA almost from its inception. I'm always amazed how everyone seems to get so hung up on the little orange robots or "bots". The real deal with KIVA is the software. Sure, Amazon will put KIVA in many facilities and it will make a great contribution to speed and efficiency. However, the real deal with KIVA is coming not too far down the road. Remember recently when there were some bills passed in California allowing 'Driverless vehicles' on the roads? This is opening the real longterm future of KIVA. The last mile. Amazon plans to own the Last Mile of all deliveries. Imagine driverless vehicles, software-controlled on the fly, delivering both packages and people. OK, now you should let your imigination run wild. UPS Supply-Chain, FedEx, US Postal, among others will be rueing the day that Amazon purchased KIVA. I promise you that their $775 million purchase price will prove to be the most amazing bargain in history.

Oct, 27 2013