This is an excerpt from a story delivered exclusively to Business Insider Intelligence Transportation & Logistics Briefing subscribers. To receive the full story plus other insights each morning, click here.
Online retail behemoth Amazon has acquired Canvas Technology, a Colorado-based warehouse robotics startup, for an undisclosed sum, according to TechCrunch.
Business Insider Intelligence
Canvas makes a robotic cart, which is designed to autonomously transport inventory around warehouses or fulfillment centers. The acquisition is Amazon’s second in the warehouse robotics space — back in 2012 the e-tailer bought Kiva Systems for $775 million and subsequently deployed its robots to help make its warehouse operations more efficient.
Here’s what it means: Canvas’s robots will help improve upon Amazon’s recent gains in warehouse efficiency, which is critical as shipping volumes rise. Robotics is the core of Amazon’s strategy to boost efficiency as well as the speed in which packages move from the warehouse floor to customers. Amazon has already seen significant efficiency gains from robotics, including 20% lower operating costs and a 50% gain in warehouse space due to more efficient use of space.
Here are the main drivers behind Amazon’s rising shipping volumes, and why improving efficiency is increasingly important:
- The e-tailer has been delivering more of its own orders. Amazon delivered about one-quarter (26%) of the orders placed on its site last year, up from nearly zero five years ago, according to estimates from Wolfe Research cited by The Wall Street Journal. The company appears intent to take over even more of its own deliveries and may have recently abandoned XPO Logistics as a shipping partner for that reason. As it increasingly moves delivery operations in-house, Amazon will need to streamline its processes to get packages out the door.
- Amazon has opened its shipping network to third parties. The company has begun to slowly open its shipping capacity to third parties via a service aptly called Amazon Shipping. To attract customers, Amazon has undercut UPS and FedEx on price by eliminating surcharges, such as the ones for residential home deliveries. But thus far merchants have had to sacrifice shipping times in exchange for lower rates — Amazon Shipping can reach most US consumers within five days, a far cry from Prime’s two-day shipping promise, per TJI Research. If Amazon can step up its delivery speeds, its services will become more appetizing to merchants that value fast shipping over cheap shipping.
The bigger picture: Amazon could be preparing to start selling or licensing its warehouse robots to third-party retailers and logistics firms, and adding Canvas robots would be a boon to those efforts. In the past, Amazon has built up new technologies for its own internal purposes and then eventually opened them up to third parties in the form of a new product or service.
Notably, the company built up a vast network of data centers to store information for its e-commerce business, which it eventually opened up to third parties via Amazon Web Services (AWS) — today’s leading public cloud platform in the US.
The firm appears to be taking a similar approach to its physical warehouse and delivery network, which is just now being opened to third parties via Amazon Shipping. It could also do the same with its warehouse robotics, perfecting the technology internally before it offers it to other companies via sales or licensing agreements. If that’s indeed Amazon’s plan, it would spell trouble for other warehouse robotics vendors, the lion’s share of which are startups.
Interested in getting the full story? Here are two ways to get access:
1. Sign up for the Transportation & Logistics Briefing to get it delivered to your inbox 4x a week. >> Get Started
2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Transportation & Logistics Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
- Google’s drone arm has launched commercial service
- Gaming will be a key differentiator in autonomous vehicles
- Autonomous driving tech startup Wayve has completed a test run without pre-mapped roads