April 13, 2009      

Summary: Kiva Systems is producing one of the first truly disruptive technologies to come out of the robotics industry. By reversing the process of pick-pack-and-ship in distribution centers — so equipment, rather than a human worker, can bring products to the shipping — it has drastically reduced the inefficiency in one of the most work- intensive parts of the supply chain. It only remains to see how broadly Kiva’s solution can spread and whether its level of efficiency equals or improves upon its overall cost.

Mitch Rosenberg, the new vice president of marketing for Kiva Systems, Inc., was quoted in a recent Kiva press release as saying “Kiva Systems is the most disruptive technology I have encountered in my career.”

Given Rosenberg’s tenure at companies like Kurzweil Computer Products, that is a very strong statement, though one is tempted to discount it a bit, given his new job at Kiva. Is this just a case of the cognitive dissonance of a new employee? Does Kiva’s Mobile Fulfillment System (MFS) really qualify as a disruptive technology? We at Robotic Business Review believe it does.

Kiva’s proposition is to make the process of pick-pack-and-ship far more efficient by reducing the amount of time humans have to spend cruising the aisles of warehouses and distribution centers to assemble the items in customer’s order, package and ship them. Rather than use cueing systems that give human pickers the most efficient workflow, Kiva’s approach is to bring intelligence and mobility into the distribution-center shelves and have the products come to the pickers, rather than the other way around. (See videos here of Kiva robots and operators picking split cases, filling orders, and in a range of operations throughout a distribution center.)

‘Disruptive’ is a Compliment

The term “disruptive technology” was introduced in 1995 by a Harvard professor, Clayton Christensen, first in an article and later in two books: “The Innovator’s Dilemma” and “The Innovator’s Solution.” At its most basic level, a disruptive technology is an innovation that improves either a product or a service in an unexpected way, i.e., unexpected by both prospective customers and other vendors in the market. In his second book, Christensen introduces the term “disruptive innovation” in order to shift the emphasis of his discussion away from technology and more to the innovations in a business model, business strategy or a more complete solution enabled by the technology.

Christensen has identified two types of disruptive innovations: low-end and new-market. Low-end disruptive innovations involve entering an existing market with a low priced, limited feature product. New market disruptive innovations are associated with the creation of a market that is new. Since we do not think Kiva fits either of these two types, we will take some liberties and describe another type: enhanced-value-network. Kiva is not low priced, and it is targeting an established market. But it is innovative and it will disrupt markets, the first of which is the market for “distribution center pick, pack and ship” applications. We will use this market as the reference for our discussions here.

Why is this discussion important? Because disruptive innovations have the potential to send existing market vendors into the trash bin of history. It has been demonstrated many

times that a new market player with a distruptive innovation gains market acceptance, then captures the existing players’ market shares and revenues. The existing players continue to enrich their product offerings by doing everything they were taught in business school. They listen to their investors and customers, but primarily make incremental improve- ments to existing products until some other innovation leapfrogs them and leaves them scrambling to catch up.

In Christensen’s analysis, every market has a value network, i.e., a prioritized set of product and service requirements. Low cost is usually not the top priority, rather factors like ease-of-use, capacity, or reliability, are the focus. In our mind, if a new vendor can sat- isfy the value network requirements and does so with a solution that represents a serious paradigm shift from the solutions of the existing vendors, then its solution is a disruptive innovation. This assumes that it excels in several aspects of the traditional value network while providing additional improvements, i.e., it enhances the value network.

Outside-the-Box Thinking Inside the Warehouse

Object-oriented programming and GUI guru Alan Kay once said that [being able to change our] perspective is worth 80 IQ points. This is equivalent to “thinking outside the box.” Kiva’s change in perspective comes from its attempt to replace the ubiquitous pick-pack- and-ship function based on serial processes, to one based on simultaneous massively parallel processes. This shift enables Kiva’s innovation to be truly disruptive to traditional processes So let’s take a look at how the Kiva MFS not only meets the market’s value network but expands it.

Distribution-center pick-pack-and-ship solutions typically come with the following requirements. (Note that in this case we are also including the process of placing product into storage as part of the discussion:

a? Quality — Did the shipment to the retail consumer have the right items in the right quantities, no more and not less? In some distribution center applications, the shipment is going to a retail store rather than a consumer, but the requirement is the same.

a? Scalability — Can operations be scaled up to meet increasing demand without interrupting current operations or incurring excessive costs?

a? Productivity — Can the solution enable profitable operation? Are the fulfillment costs predictable and consistent?

a? Flexibility — Can the solution accommodate a variety of item types in terms of size, shape and weight? Can the system configuration be easily modified?

a? Storage density — Can the system take advantage of the “volume” of the distribution center facility, i.e., store product vertically as well as across floor space?

In addition, the Kiva MFS has expanded the traditional value network to include:

a? Self organization — Is the system able to automatically relocate items that are picked frequently closer to the picking operations? Does the system identify items that are commonly purchased together and shelve them near one another?

a? Rapid setup — can the system be initially installed quickly?

a? Portability — Can the system be easily moved to a new location?

a? Lower maintenance — Does the system require minimal maintenance, either because the equipment is reliable or uncomplicated?

a? Reduced worker stress — Is the system designed to reduce the stress on the distribution center employees, thus raising their job satisfaction?

Kiva’s MFS, unlike competitive systems that use carousels and conveyors, employs hundreds of mobile robots, each of which can lift a set of storage shelves and bring it to a stationary pick and pack station staffed by a human. The robots are squat and have no arms or legs. They are designed to drive under the shelves, expand vertically to lift a shelf unit off the floor and then carry it to a specific picking station. The robots visually follow guidance stickers on the floor that delineates the paths for transport.

Flexibility In Implementation and Operation

The Kiva system is highly flexible since everything is easily moved; nothing is bolted down.

Algorithms automatically reconfigure the warehouse to optimize the efficiency of the process. Matching items are placed together. Frequently picked items are automatically moved to positions closer to the pick and pack stations. The same flexibility enables easy scalability without interrupting ongoing operations. Expansion only requires adding more shelve units and maybe more robots. The system even sends each robot off periodically to recharge its batteries.

Maintenance costs are significantly reduced because they are confined to robots and floor stickers. Storage density is still a challenge for Kiva, because there are limits to how high a shelf unit can be if it is often moved, but that is not an insoluble problem.

If you have ever driven in rush hour traffic you may wonder how all these robots avoid colliding with each other. That is the genius of the Kiva technology and why it is a disruptive innovation. The system coordinates the movement of hundreds of autonomous agents to keep both their task lists and their physical selves from clashing.

This may not be rocket science, but it is a very difficult computer science problem and Kiva has solved it in a practical application and is aggressively refining that solution.

The elegance of this solution has not gone unnoticed. Major retailers like Walgreens, Staples and Zappos.com have already become Kiva customers — a major coup for a startup. Also, assisted by Bain Capital, Kiva has managed to obtain additional rounds of venture capital in what we would all agree is a very difficult time to finance anything.

A Kiva competitor has only two options to stay off the slippery slope — either buy a company like Kiva, or start an independent division to compete with its existing business. Since Kiva is unique, the second option is more feasible. Even this option is difficult. Kiva’s technology is difficult to develop and Kiva has carefully built a barrier to entry with its patent applications.

As we see it, Kiva is a disruptive technology/innovation in its own category, which could be labeled “enhanced value network.” It will be interesting to see how quickly Kiva captures market share and what other applications it decides to tackle after pick, pack and ship.

—Steve McClure