Cost reduction through robots? Amazon's purchase of Kive Systems sparks controversy

Amazon recently used some of its mountains of cash to purchase a company that manufactures robots, a move that will help improve efficiency in its warehouses and distribution centers, The New York Times Bits Blog reports.

Under chief executive Jeff Bezos, the Seattle, Washington-based company has continually worked to stay ahead of its heavy online competition through its strategic investment in emerging technologies and systems. Over the past decade, Amazon has demonstrated it is not afraid to spend aggressively – and even log losses in the short term – if it expects a substantial return on investment.

With its purchase of Kiva Systems, Amazon has once again demonstrated its indefatigable desire to secure its position as the leading global online purveyor of, well, pretty much everything. Amazon currently employs thousands of workers in its warehouses across the U.S. and elsewhere throughout the world, and some have argued its decision to buy Kiva could indicate it hopes to move away from human workers and toward computers.

Though sales and revenue at Amazon have continually surged over the past few years, the retailer has come under fire from shareholders concerned about its relatively slim operating margins. While a majority of analysts and investors contend the firm's profit margins are poised to surge in the future thanks to its substantial research and development expenditures, Amazon's relatively weak results in its most recent fiscal quarter prompted a fiery debate over its long term growth strategy.

Unlike companies such as Apple, which accrue significant profits from producing a relatively small number of items, Amazon has only recently entered the production segment. Its Kindle devices, including its recently launched Fire tablet, represented the company's first foray into designing and producing its own lineup of consumer products. Analysts believe the company is logging a loss on sales of the Fire, but Amazon is likely to profit handsomely from them over the next few years, as shoppers use them at Amazon's online store.

With its latest purchase of Kiva, Amazon is once again endeavoring to improve supply chain management as it eyes cost reduction. Labor costs have risen for the company over the past few years, as it opened an increasing number of distribution facilities, and using robots in place of humans could help improve profit margins and procurement cost reduction, some analysts say.

Nevertheless, while critics assert the robots will likely replace human workers, experts said they are designed to work in conjunction with them. Johns Hopkins University robotics researchers Michael Kutzer and Christopher Brown told The Times the majority of robots require the guiding touch of a human worker to function optimally.

"It is much more likely, for now, that robots will help augment people's abilities, allowing us to use robots for things humans can't do," Brown said.

Former Treasury Secretary Lawrence Summers corroborated such an assertion, affirming humans have long been skeptical about the increasing use of technology in the labor force. He noted workers feared the implementation of such systems in the midst of the Industrial Revolution. Skepticism of technology has remained ever since, he added.

"There has long been a mentality that we're going to run out of work to do and there is going to be an absence of work for people," according to Summers. "Both have been asserted in every generation and always historically been wrong. In reality, if people are freed up from one thing they are able to do something different."

Nonetheless, the battle rages over whether Amazon's decision to buy Kiva underscores the company's commitment to replacing workers. With the U.S. economy still struggling in the wake of the recession, such fears are understandable – although unsubstantiated, some argue.