7 ms·

Indeed. 4000 people @ 11/hr for a month? even without overtime that's 1.7 million. The automation can't be nearly that expensive.

by jfoutz 15y ago

scarmig 15y ago
Let's assume that you would need 1000 machines to have as much throughput as 4000 people. WAG, but I'd wager that each of those machines would cost $500k. That means 100 million in immediate outlays. WAG 2: fuel/electricity/maintenance is $200/month, and you need a team of 20 engineers to watch over them at $10k/engineer/month. So recurring costs come to $400k. Which brings us to: 100M/1.3M = 77 months, or between 6 and 7 years. That, however, doesn't take into account the opportunity cost of the initial $100,000,000 outlay. That brings it up to around a decade. So, a decade to break even.
- jfoutz 15y ago
  Labor costs are likely double, if not more, than what i've estimated. overtime + insurance + drug testing + security + all the other crap i'm forgetting.
  - lwat 15y ago
    Still, most companies just do not have a $100 million to change to a robotic system.
    - ajkessler 15y ago
      Most companies don't have 4000 employees, or need 1000 robots. Like every business, you add capacity as necessary. Diapers.com started with one mom and minivan.
  - intended 15y ago
    Well if you treat people as human machines, remove unionizing ability and what have you, then you can bring yourself to competitive levels with China, which has kinda made a very persuasive point that human robots are cheaper than mechanical ones. The only issue with labor of course is the so called 'managing' aspect of it, which covers things like quality of life. Robots don't have and will never complain about, while being able to do tasks at a level that most humans wont ever be able to.
    - ghshephard 15y ago
      Re: " China, which has kinda made the point that human robots are cheaper than mechanical ones." Not for long. "The China Business News on Monday quoted Foxconn Chairman Terry Gou as saying the company planned to use 1 million robots within three years, up from about 10,000 robots in use now and an expected 300,000 next year." http://www.reuters.com/article/2011/08/01/us-foxconn-robots-idUSTRE77016B20110801 http://www.reuters.com/article/2011/08/01/us-foxconn-robots-...
      - intended 15y ago
        The point still stands. It may (should) change in the future as people start asserting their rights. (I have seen the article before, its Foxconn currently, but labor prices and further opportunities haven't reached a point where you can safely bleed off the population away from manufacturing just yet.) At the same time though, it shows that as long as you have people who have no option, you can use them to easily produce more value than robots at similar costs. Which is what the Mother Jones article is basically about. Also, its worth remembering that those robots are also going to be used for capacity expansion, while keeping cheap tractable labour. TLDR: Improving standards of living will make robotics more competitive, unless there are sufficient people who have no other option but to compete with machines.
- JohnsonB 15y ago
  This article: http://money.cnn.com/2011/11/09/smallbusiness/kiva_robots/index.htm http://money.cnn.com/2011/11/09/smallbusiness/kiva_robots/in... says that 1000 robots costs $15-20 million, not the $500 million that 500k a piece would run. Also what is there to indicate such a hefty need for engineering oversight? 20 engineers constantly overseeing the machines sounds like they are either constantly breaking down, or need a significant amount of custom programming per unit as upkeep, both of which just sounds like a quality control issue on Kiva's side. It makes sense that there's a lot of initial planning/programming for each installation, but I'd expect it to be mostly self-running after that. I would be curious about the energy needs per unit, though. They seem to be carrying around more weight per package shipped than with a human picker carrying just what goes in one package, but then again their use of energy might be more efficient than humans.
  - sokoloff 15y ago
    1000 robots needing just 30 minutes of preventative maintenance per week is 500 hours of PM a week. That sounds like about the amount of PM a staff of 20 engineers can supply, once you account for admin, PTO, training, travel between robots, and doing the actual work. Engineer does not solely mean "one who creates software".
    - Game_Ender 15y ago
      The word you are looking for is "technician".
      - scarmig 15y ago
        Well, everyone's an engineer nowadays. My company has "custom service engineers." =)
        Intermernet 15y ago
        I may be old school, but I don't regard anyone as an engineer without a degree in engineering. Other wise, they're a hacker ;-)
- ars 15y ago
  > Let's assume that you would need 1000 machines to have as much throughput as 4000 people. I think your assumption is way off. For one each machine works 3 times as long as a person (24 hours a day vs 8).
  - deleted 15y ago
    [deleted]
nikcub 15y ago
you have underestimated both the cost of people and the cost of robots
- jfoutz 15y ago
  I'm really curious about the robot costs. The automated shelving systems i've seen look, well, really simple. I'm pretty sure i could get a half assed DIY system working for a few hundred dollars. An industrial version can't be more than 100x the price can they? 50k per mover, on the outside? edit Bam. Average $5,000,000 an install. http://techcrunch.com/2011/11/18/founder-stories-mick-mountz-kiva-systems-we-have-been-growing-at-over-100-a-year/ http://techcrunch.com/2011/11/18/founder-stories-mick-mountz... or less than three months labor costs, given my poor estimate. (granted this install might be orders of magnitude larger)
  - nikcub 15y ago
    > "I'm pretty sure i could get a half assed DIY system working for a few hundred dollars." you think the same thing when you see an Oracle instance that cost tens of millions and think you could have done it with postgres. what these retailers are really paying for is reliability, redundancy and support - having a big brand co. to call when something goes wrong. that isn't to say that there isn't a mysql/pgsql style opportunity within warehouse automation and supply chain management - it is just that it isn't likely that Wal-Mart and Amazon would be your customer. Similar development and deployment cycle as with mainframes and servers - what was once the territory of only large companies and governments is now an accessible technology and competitive advantage amongst small and medium businesses as well The most interesting aspect of supply chain management to me is the concept of a completely outsourced warehouse - where it is cheaper to have a specialized company manage and run your inventory and supply chain as part of their larger infrastructure (and economies of scale etc.) rather than building your own warehouses and system. Amazon became very very good in this field because an outsource style solution didn't exist at the time and they had no choice other than to do it themselves, but you could imagine that an Amazon being started today would not have its own warehouses and would not be writing long letters to shareholders trying to justify hundreds of millions in capital expenses in order to automate warehouses and bring down margins.
joe24pack 15y ago
How much automation do you need and how "bulletproof" does it have to be? What's the up time? What sort of rates does it have to handle average and peak? How accurate does it have to be? Does your control and execution software have to be custom (since you business model and methods are oh so different than your competitors) or will the standard be good enough? Trust me automation and the software to drive it can be quite expensive.
rsheridan6 15y ago
Amazon probably knows their business better than you do. If they're hiring people instead of buying robots, that's probably because people get the job done cheaper - for now.

Indeed. 4000 people @ 11/hr for a month? even without overtime that's 1.7 million. The automation can't be nearly that expensive.

by jfoutz 15y ago

Indeed. 4000 people @ 11/hr for a month? even without overtime that's 1.7 million. The automation can't be nearly that expensive.

scarmig 15y ago

Let's assume that you would need 1000 machines to have as much throughput as 4000 people. WAG, but I'd wager that each of those machines would cost $500k. That means 100 million in immediate outlays. WAG 2: fuel/electricity/maintenance is $200/month, and you need a team of 20 engineers to watch over them at $10k/engineer/month. So recurring costs come to $400k. Which brings us to: 100M/1.3M = 77 months, or between 6 and 7 years. That, however, doesn't take into account the opportunity cost of the initial $100,000,000 outlay. That brings it up to around a decade. So, a decade to break even.

jfoutz 15y ago
Labor costs are likely double, if not more, than what i've estimated. overtime + insurance + drug testing + security + all the other crap i'm forgetting.
- lwat 15y ago
  Still, most companies just do not have a $100 million to change to a robotic system.
  - ajkessler 15y ago
    Most companies don't have 4000 employees, or need 1000 robots. Like every business, you add capacity as necessary. Diapers.com started with one mom and minivan.
- intended 15y ago
  Well if you treat people as human machines, remove unionizing ability and what have you, then you can bring yourself to competitive levels with China, which has kinda made a very persuasive point that human robots are cheaper than mechanical ones. The only issue with labor of course is the so called 'managing' aspect of it, which covers things like quality of life. Robots don't have and will never complain about, while being able to do tasks at a level that most humans wont ever be able to.
  - ghshephard 15y ago
    Re: " China, which has kinda made the point that human robots are cheaper than mechanical ones." Not for long. "The China Business News on Monday quoted Foxconn Chairman Terry Gou as saying the company planned to use 1 million robots within three years, up from about 10,000 robots in use now and an expected 300,000 next year." http://www.reuters.com/article/2011/08/01/us-foxconn-robots-idUSTRE77016B20110801 http://www.reuters.com/article/2011/08/01/us-foxconn-robots-...
    - intended 15y ago
      The point still stands. It may (should) change in the future as people start asserting their rights. (I have seen the article before, its Foxconn currently, but labor prices and further opportunities haven't reached a point where you can safely bleed off the population away from manufacturing just yet.) At the same time though, it shows that as long as you have people who have no option, you can use them to easily produce more value than robots at similar costs. Which is what the Mother Jones article is basically about. Also, its worth remembering that those robots are also going to be used for capacity expansion, while keeping cheap tractable labour. TLDR: Improving standards of living will make robotics more competitive, unless there are sufficient people who have no other option but to compete with machines.
JohnsonB 15y ago
This article: http://money.cnn.com/2011/11/09/smallbusiness/kiva_robots/index.htm http://money.cnn.com/2011/11/09/smallbusiness/kiva_robots/in... says that 1000 robots costs $15-20 million, not the $500 million that 500k a piece would run. Also what is there to indicate such a hefty need for engineering oversight? 20 engineers constantly overseeing the machines sounds like they are either constantly breaking down, or need a significant amount of custom programming per unit as upkeep, both of which just sounds like a quality control issue on Kiva's side. It makes sense that there's a lot of initial planning/programming for each installation, but I'd expect it to be mostly self-running after that. I would be curious about the energy needs per unit, though. They seem to be carrying around more weight per package shipped than with a human picker carrying just what goes in one package, but then again their use of energy might be more efficient than humans.
- sokoloff 15y ago
  1000 robots needing just 30 minutes of preventative maintenance per week is 500 hours of PM a week. That sounds like about the amount of PM a staff of 20 engineers can supply, once you account for admin, PTO, training, travel between robots, and doing the actual work. Engineer does not solely mean "one who creates software".
  - Game_Ender 15y ago
    The word you are looking for is "technician".
    - scarmig 15y ago
      Well, everyone's an engineer nowadays. My company has "custom service engineers." =)
      - Intermernet 15y ago
        I may be old school, but I don't regard anyone as an engineer without a degree in engineering. Other wise, they're a hacker ;-)
ars 15y ago
> Let's assume that you would need 1000 machines to have as much throughput as 4000 people. I think your assumption is way off. For one each machine works 3 times as long as a person (24 hours a day vs 8).
- deleted 15y ago
  [deleted]

nikcub 15y ago

you have underestimated both the cost of people and the cost of robots

jfoutz 15y ago
I'm really curious about the robot costs. The automated shelving systems i've seen look, well, really simple. I'm pretty sure i could get a half assed DIY system working for a few hundred dollars. An industrial version can't be more than 100x the price can they? 50k per mover, on the outside? edit Bam. Average $5,000,000 an install. http://techcrunch.com/2011/11/18/founder-stories-mick-mountz-kiva-systems-we-have-been-growing-at-over-100-a-year/ http://techcrunch.com/2011/11/18/founder-stories-mick-mountz... or less than three months labor costs, given my poor estimate. (granted this install might be orders of magnitude larger)
- nikcub 15y ago
  > "I'm pretty sure i could get a half assed DIY system working for a few hundred dollars." you think the same thing when you see an Oracle instance that cost tens of millions and think you could have done it with postgres. what these retailers are really paying for is reliability, redundancy and support - having a big brand co. to call when something goes wrong. that isn't to say that there isn't a mysql/pgsql style opportunity within warehouse automation and supply chain management - it is just that it isn't likely that Wal-Mart and Amazon would be your customer. Similar development and deployment cycle as with mainframes and servers - what was once the territory of only large companies and governments is now an accessible technology and competitive advantage amongst small and medium businesses as well The most interesting aspect of supply chain management to me is the concept of a completely outsourced warehouse - where it is cheaper to have a specialized company manage and run your inventory and supply chain as part of their larger infrastructure (and economies of scale etc.) rather than building your own warehouses and system. Amazon became very very good in this field because an outsource style solution didn't exist at the time and they had no choice other than to do it themselves, but you could imagine that an Amazon being started today would not have its own warehouses and would not be writing long letters to shareholders trying to justify hundreds of millions in capital expenses in order to automate warehouses and bring down margins.

joe24pack 15y ago

How much automation do you need and how "bulletproof" does it have to be? What's the up time? What sort of rates does it have to handle average and peak? How accurate does it have to be? Does your control and execution software have to be custom (since you business model and methods are oh so different than your competitors) or will the standard be good enough? Trust me automation and the software to drive it can be quite expensive.

rsheridan6 15y ago

Amazon probably knows their business better than you do. If they're hiring people instead of buying robots, that's probably because people get the job done cheaper - for now.