Amazon has doubled down on automation to cut costs and increase efficiency across its retail network. The company has invested billions in robotics and AI-driven warehouse technology to simplify logistics, minimize costs, and reinvest savings into its growing AI infrastructure.
As Amazon faces growing competition from low-cost e-commerce platforms like Temu and Shein, it holds high hopes for automation to improve delivery speeds and boost its profits in the long run.
Amazon expands automation to cut costs and boost efficiency
Amazon is betting all its chips on robotics, hoping to score big savings by cutting costs on expanding retail networks and reinvesting it into artificial intelligence. The company expects to allocate about $25 billion toward automating its retail system, such as next-gen robotic-led warehouses. As low-budget rivals like Temu get a head start on automation, Amazon seeks to keep up by increasing efficiencies across all departments and improving delivery times.
Analysts estimate that out of Amazon’s $100 billion budgeted for capital expenditure in 2025, a quarter will be allocated toward heavily automating the company’s e-commerce service, while the rest will be cashed in for expanding its AI objectives.
According to Tye Brady, the chief technologist at Amazon Robotics, automation has successfully changed the company’s daily operations, and they expect to keep investing in it for better results. This obsession with robotics is a side effect of the department’s efforts to cut costs by downsizing its middle management and reorganizing its initiative for better efficiency.
On matters of downsizing, Amazon let go of over 25,000 employees after the COVID-19 pandemic, which pulled more money for considerable investments in its data center capacity as the company tries to outdo giant rivals Google and Microsoft with its profitable Amazon Web Services.
Amazon integrates robotics to improve warehouse operations
Analysts at Morgan Stanley estimate that Amazon’s investments in new-gen robotics for their warehouses could save the company about $10 billion annually by the decade’s end.
Take Amazon’s fulfilment centre in Louisiana, for example. The facility utilizes mobile drive units to move products around and high-tech robotic arms to pick and sort them. Cutting down on the labor force required for operation in the warehouse has registered massive savings of 25% in costs, proving that the goal of $10bn is more achievable than people think.
The company is also hiring from a large pool of robotics talent for its initiative to integrate AI language models into its robots. For instance, Amazon hired Pieter Abbeel and Peter Chen, co-founders of physical AI start-up Covariant, to develop more advanced robots to improve warehouse automation.
The company also seeks to compete against lower-cost rivals like Temu and Shein by maximizing their common weakness of slower deliveries. To do this, Amazon wants to separate its logistics network into certain regions so that inventory is always available for same-day deliveries for Prime subscribers.
Amazon’s push to automate operations is not just about cutting costs but also addressing labor shortages in the logistics sector. According to Eva Ponce, a director at the MIT Center for Transportation & Logistics, the company is deploying robots at an extreme pace to compensate for these staffing challenges and still achieve fast delivery times.
“As we continue to roll out automation, we continue to create new jobs. And there are new job types that we never imagined,” noted Brady
But Amazon’s interest and investment in robotics isn’t a new phase brought about by the recent advancement of AI. After acquiring Kive Systems in 2012, the company has since deployed about 800,000 mobile drive units, leading to the recent launch of a fully autonomous lift vehicle called Proteus. Proteus can move around the warehouse independently using sensors trained by AI, bringing the vision of full automation an inch closer to reality.
More recently, Amazon has joined forces with tech giant Nvidia to develop digital replicas of its warehouse, which allow the company to test robotic performance through simulated scenarios before deploying them in live environments.
As Amazon progresses with automation, it remains focused on balancing cost savings with worker safety and operational efficiency. “We don’t do technology for technology’s sake,” Brady said. “Every investment we make in robotics and AI is driven by our goal to improve efficiency, safety, and customer experience.”
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