Amazon has intensified its focus on robotics development in recent years, a move that could potentially save the e-commerce giant up to $10 billion annually, according to a research note from Morgan Stanley analysts published on Sunday.
The company now operates a fleet of over 750,000 robots that play integral roles throughout the fulfillment process. These robots are utilized for storage and inventory management, picking and packing items, sorting packages, and transporting them to loading docks for delivery to customers.
Since 2022, Amazon has unveiled six new robotic models, including Proteus, a fully autonomous mobile robot, three types of robotic arms, and Sequoia, a containerized storage system. Additionally, the company employs robots capable of creating custom packaging tailored to an item's specific dimensions.
In September 2024, Amazon opened its first "next-generation" fulfillment center in Shreveport, Louisiana, integrating all of its latest robotic innovations. The company anticipates a 25% reduction in fulfillment costs during peak periods at this facility.
Morgan Stanley analysts project that if 30-40% of Amazon's U.S. orders are processed through these advanced warehouses by 2030, annual savings could reach as high as $10 billion. However, they caution that achieving full-scale implementation will require time.
"We expect AMZN to continue expanding its warehouse network to accommodate growth while simultaneously upgrading existing facilities with next-gen robotics in both new constructions and retrofits," the analysts noted. "The pace at which Amazon transitions volumes to robotics-enabled warehouses will likely depend on balancing reasonable build/retrofit timelines (current robotic facilities still take 1-2 years) with avoiding disruptions to retail service."
Developing next-gen fulfillment centers is considerably more costly than traditional ones. Reports suggest robotic-powered warehouses cost approximately $450 million to construct, compared to $200 million for conventional facilities and $100 million to retrofit older warehouses with robotics.
The analysts estimate that Amazon will have $60 billion in net cash by the end of 2024 and generate around $150 billion in aggregate free cash flow over the next two years. "Given this financial position, investment capital is unlikely to hinder how quickly AMZN transitions to next-gen robotics...meaning if they can implement changes without disrupting services, they likely will proceed," they wrote.
Furthermore, the analysts believe additional investments in deploying robots at sorting centers and scaling the technology internationally could yield even greater savings for Amazon.