How Kiva Robots Help Zappos and Walgreens

Fetching goods and filling orders, little helpers from Kiva Systems are revolutionizing companies' supply-chain and distribution networks

By Jessie Scanlon

Kiva's ottoman-shaped robots are used in warehouses run by Staples, Walgreens and Gap.com Kiva

In a warehouse at the headquarters of Kiva Systems in Woburn, Mass., an ottoman-shaped robot slides beneath a four-shelf storage unit holding an assortment of consumer goods, lifts it, and navigates back to Mick Mountz, the startup's founder and chief executive. Mountz grabs a box of Kellogg's Frosted Mini-Wheats off of the shelf and turns to put it in a shipping box. By the time he has turned back again, the robot is carrying the 8-ft.-tall shelving unit away, and he is facing another stack of goods carried by a different robot.

This is Kiva's demo space, where Mountz shows potential customers what his wireless robotic fulfillment system can do. It's also where Kiva handles manufacturing, turning out 200 squat, orange robots—one model can hoist 1,000 lb., while the other is strong enough for 3,000-lb. pallets­—every month. But you don't have to go to this Boston suburb to see Kiva's bots and pods, as the company calls the shelving units: They're already fast at work in warehouses run by Staples (SPLS), Walgreens (WAG), Gap.com (GPS), and online retailer Zappos.

"It's exceeded all of our expectations, doubling the productivity of our pickers and cutting our energy costs in half," says Craig Adkins, vice-president for fulfillment operations at Zappos, which began using Kiva nine months ago. Adkins won't say how much Zappos paid for its little helpers, but the average Kiva installation costs $5 million, with set-ups ranging from $1 million to $25 million now in the works.

Integrated Technologies

Mountz, now 43, first grappled with the challenge of efficient fulfillment as an executive at Webvan, the ill-fated online grocer that went under in 2001. Deciding robotics held the answer, he moved back to Boston, where he had studied mechanical engineering at Massachusetts Institute of Technology and earned his MBA at Harvard. To date, after two rounds of funding led by Bain Capital Ventures, Mountz's six-year-old company has raised more than $18 million, with annual sales topping $50 million.

Robots have been around a long time, of course. The newness of Kiva, which has four patents, with another 14 pending, is the way in which Mountz's team has integrated three technologies: WiFi, digital cameras, and low-cost servers capable of parallel processing. The servers work in real-time, receiving orders, immediately dispatching robots to bring the required pods to the worker fulfilling the order, and then returning the pods to their storage locations. The robots receive their orders wirelessly, while using cameras to read navigational barcode stickers on the warehouse floor.

In combining these technologies, the 125-employee company is bringing a potentially breakthrough innovation to warehousing and distribution, which supply-chain research firm Armstrong & Associates estimates is $37.5 billion-a-year business. "Kiva represents the first really 'new' technology in order fulfillment in years," wrote analysts at Aberdeen Group after touring the Zappos warehouse last year.

With plans for 1,000 bots in its distribution centers by summer, Walgreens will be Kiva's biggest customer. "I don't need to tell my competitors how much more productive it makes us," says Randy Lewis, senior vice-president for supply chain and logistics at the Deerfield (Ill.) drugstore chain. "It's been a good investment."

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