Amazon’s New Distribution Centers Are Ground Zero for AI

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Market Trends

Imagine a warehouse that measures a quarter mile by a quarter mile. That’s enough space for 59 football fields…

Too big to imagine? Well, it’s not too big to build…

That’s the size of Amazon’s (Nasdaq: AMZN) new distribution center in Robbinsville, New Jersey.

Even with 3.5 million square feet (two stories of a square quarter mile of space), the most eye-opening part of the warehouse is not its size but the workers who run it …

A Well-Oiled (and Automated) Machine

Here’s a picture my son Noah took of the new Amazon distribution center in New Jersey…

You can’t even see the other end of the building!

There’s no equipment in this section yet. But don’t worry – it’s coming.

Once the equipment is installed, the warehouse will look like this…

This is the conveyor system Amazon uses to take packaged orders to the shipping trucks that deliver products to customers.

Amazon warehouses each hold about 21 million different items. Amazingly, once you place your order with Amazon, it is picked, packed and ready for shipment in less than 15 minutes.

How is that possible?

Robots.

AI: The Biggest 4IR Disruptor?

Here at Energy & Resources Digest (as well as in our monthly newsletter Oxford Resource Explorer), we’re fascinated by the way the “Fourth Industrial Revolution” (4IR) is disrupting the energy and commodities sectors.

What’s going on at Amazon’s distribution warehouses offers a real-time glimpse of the changes 4IR is bringing…

Amazon used to have humans roaming its vast warehouses, hand-picking items to fill orders.

Now it uses robots to bring the warehouse’s shelving units to the packers, who can pick the items off the shelves without taking a step. Then the robots take the shelving units back to their spots in the warehouse.

A computer system keeps track of the movements of the robots and shelving units.

This is artificial intelligence (AI) at work at Amazon.

Watching the robots move inventory around is amazing. (You can get an idea of what I’m talking about by watching this short video, courtesy of CNN.)

Here’s what Amazon CEO Jeff Bezos said at the Internet Association’s annual gala in Washington, D.C…

“It is a renaissance; it is a golden age. We are solving problems with machine learning and artificial intelligence that were in the realm of science fiction for the last several decades.

“Natural language understanding… machine vision problems… it really is an amazing renaissance.”

There isn’t a business on the planet that AI and machine learning couldn’t improve. Amazon uses AI in nearly every aspect of its business… not just its distribution warehouses.

The Prime Air drone delivery system is a – ahem – “prime” example. The system uses machine learning, machine vision, natural language processing and other systems, all tied together with AI.

But Amazon uses AI for less showy stuff too.

For instance, it uses AI to improve your search results and make improved product recommendations. The AI is also able to manage inventory and accurately forecast which products will need to be restocked.

Sky’s the Limit for A(I)mazon?

The first quarter of 2017 was one of the most profitable quarters in Amazon’s 23-year existence.

It reported net income of $724 million, its eighth consecutive quarter in the black. Revenues rose to $43.7 billion, up 50% year over year.

I think Amazon will continue to push its upside higher for the foreseeable future. It’s one of those moat companies. Who else could possibly replicate what it has?

Wal-Mart is giving it a go, but that’s a tall order. I’m a big fan (and user) of Amazon, but I’m an even bigger fan of AI and where it’s going.

All investors should have an AI stock or two in their portfolios.

Good investing,

Dave

P.S. AI is one of the great disruptive technologies of 4IR. Lately, this is what we’ve been obsessing over here at Energy & Resources Digest.

It’s pretty clear that 4IR will make a lot of folks more money than they know what to do with…

You see, it’s important to know not only which companies – like Amazon and Tesla – are using these technologies to disrupt the marketplace, but also which materials and resources are driving the technologies…

I have one such material I want to tell you about. Smart investors will lock in profits as high as 900%. But timing is everything…

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Managing Editor’s Note: A previous version of this article erroneously stated the warehouse’s size to be 1.2 million square feet.