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Amazon Grows Its Robot Army -- Is a Robot Air Force Next?

Donald Trump has been sworn in as President, and a new day has dawned for America -- one would hope.

Central to President Trump's campaign was a promise to begin returning jobs to America, and giving credit where it's due, he seems to have begun fulfilling the promise even weeks before taking office, twisting arms and throwing elbows on Twitter, and urging everyone from Carrier to GM to Ford to...Toyota (!) to stop building factories in Mexico and keep more jobs here at home. But there's one notable outlier to all of this good jobs news: (NASDAQ: AMZN).

Over at Amazon, you see, they're busily eliminating U.S. jobs and handing them over to robots.

Amazon has a plan for floating, robotic warehouses.


A robot is coming to steal your job

We first discussed this phenomenon -- the roboticization of America's workforce -- last year, noting how in a world where robots are popping up in more and more places, they've become especially prevalent in Amazon's warehouses. One year ago, Amazon boasted a workforce of 90,000 humans, packing and moving boxes within its warehouses. Alongside them worked an army of 30,000 robots.

That was then. Over the past 12 months, though, The Seattle Times reports, Amazon has grown its robot workforce 50%, which is even faster than it's been growing its human workforce (up 47% year over year at the end of Q2 2016). As of today, no fewer than 45,000 Kiva robots work at Amazon. Out of a mixed workforce of 314,000 robots and humans, then, roughly one worker in seven is a robot.

A flying robot

As big as Amazon's robot army is, the company doesn't seem content to stop with just a ground army -- it wants a drone air force, too. Last month, Amazon announced its first drone delivery, dropping off a Fire TV (and a pack of popcorn) to a customer in England. And Amazon's aerial ambitions could be even bigger than this. As revealed in filings with the U.S. Patent and Trademark Office, Amazon is seeking to develop multiple products in support of aerial package delivery.

The first such patent concerns a "collective unmanned aerial vehicle." As described in the filing, Amazon's delivery drones are designed to carry up to 10 pounds of payload for up to 30 minutes before recharging. But by operating in teams, multiple Amazon UAVs could join together to cooperatively lift large items for delivery that too weighty to be carried by any one drone at one time.

The patent's attached illustrations show drone "collectives" comprising seven, 14, and even as many as 24 drones operating in tandem. Working together, such drone teams could deliver packages weighing several hundred pounds. Indeed, Amazon says that with enough drones, it can deliver "virtually any size, weight or quantity of items" by drone.


Separately, Amazon has sought patent protection for an "airborne fulfillment center utilizing unmanned aerial vehicles for item delivery" -- in other words, a flying warehouse dispatching packages by drone. Here, Amazon envisions a warehouse in the sky attached to a gigantic dirigible floating at 45,000 feet above the ground. Such airborne fulfillment centers would dispatch deliveries via the aforementioned teams of "collective UAVs," and would themselves be restocked with new goods delivered by smaller dirigibles, shuttling back and forth to earth.

What it means for investors

Sound incredible? It almost is. And for the time being, Amazon's plan to build a fleet of flying, robotic warehouses remains only that -- a plan (albeit one with detailed blueprints).

However, The Seattle Times estimates that one day, flying warehouses and drone deliveries could cut Amazon's cost of delivering packages "the last mile" to a customer's doorstep from a few dollars per delivery down to just "a few cents for each package." What does this mean for investors?

Well, Amazon ships more than one billion packages annually. If the last mile of each such delivery costs $3 or $4, then the total cost of such deliveries -- and the savings from not incurring those costs -- could amount to as much as 2% or even 3% of the company's $128 billion in annual revenues. That could at least potentially translate into a 2% or 3% boost to profit margins for Amazon.

Would it be hard for Amazon to make flying warehouses and "collaborative drones" a reality? Probably. Then again, only a few years ago, critics were calling drone delivery unrealistic, too. Meanwhile, S&P Global Market Intelligence clocks Amazon's net profit margin at only 1.6%. When you consider that even a two- or three-percentage point increase in margin could double or triple Amazon's profits, Amazon certainly has good reason to give these ideas a try.

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