Ama­zon’s ‘neg­a­tive press based on myth’

James Tit­comb vis­its the com­pany’s gi­ant ful­fil­ment cen­tre in Baltimore to see how the on­line re­tailer is revo­lu­tion­is­ing its lo­gis­tics oper­a­tions

The Sunday Telegraph - Money & Business - - Front page - By James Tit­comb in Baltimore

CRIT­I­CISM of Ama­zon’s work­ing con­di­tions is un­in­formed and grounded in “myths”, a se­nior ex­ec­u­tive has said.

Ama­zon an­nounced a ma­jor pay in­crease for staff in its ful­fil­ment cen­tres amid al­le­ga­tions that staff were poorly com­pen­sated for their work.

“There is a lot of neg­a­tive press out there, on work­ing con­di­tions, on pay, on safety,” said John Fel­ton, the head of Ama­zon’s ware­house oper­a­tions.

“For the most part I don’t agree with any of it. Much of it is writ­ten by peo­ple that haven’t been to the build­ings. A lot of it is myths out there, not re­al­ity.

“We’re a big com­pany and I think that means that we are a tar­get. As a big com­pany, one of our re­spon­si­bil­i­ties is to ac­cept scru­tiny.”

Ear­lier this month, Ama­zon an­nounced a pay rise for staff in the UK and US and did away with in­cen­tive­based pay. Staff in Lon­don had their min­i­mum pay raised from £8.20 to £10.50, and £8 to £9.50 for the rest of the UK. Staff in the US had min­i­mum pay raised from $10 to $15.

The com­pany had pre­vi­ously been ac­cused by US se­na­tor Bernie San­ders of un­der­pay­ing its work­ers, while sev­eral in­ves­ti­ga­tions raised ques­tions about work­ing con­di­tions and safety.

Ama­zon has em­barked on what the com­pany calls a trans­parency drive in re­cent months in an at­tempt to dis­pel crit­ics. The push has in­cluded em­ploy­ing “am­bas­sadors” who re­ply to al­le­ga­tions of poor treat­ment on Twit­ter.

Mr Fel­ton said Ama­zon was also plan­ning to in­crease the num­ber of ful­fil­ment cen­tre tours it gives to the pub­lic to coun­ter­act neg­a­tive per­cep­tions.

“We’ve got a great em­ployee ex­pe­ri­ence we’re re­ally proud of,” Mr Fel­ton said. He added that Ama­zon was tak­ing a “lead­er­ship po­si­tion” on pay and hoped other com­pa­nies would fol­low.

This week, Ama­zon is ex­pected to give more de­tails of how much the pay rise will cost the com­pany when it re­ports fi­nan­cial re­sults for the third quar­ter of the year.

An­a­lysts ex­pect sales to rise about 30pc to $57bn (£43bn).

When staff en­ter Ama­zon’s cav­ernous dis­tri­bu­tion cen­tre on the out­skirts of Baltimore they pass un­der a sign that reads: “Work hard. Have fun. Make his­tory.” Be­fore they go through an air­port­style se­cu­rity screen­ing to start work, they stash per­sonal items in a locker (keys, change and mo­bile phones are pro­hib­ited on the ware­house floor). A sign re­in­forces “Ama­zon’s pe­cu­liar ways”. One reads: “We avoid the bland per­son­al­ity that cus­tomers typ­i­cally as­so­ciate with the big ho­mo­ge­neous, cor­po­rate Borg.”

The first thing you notice as you walk into the four-storey cen­tre is the roar of the con­veyor belts. Hurtling along 14 miles of track are yel­low con­tain­ers car­ry­ing chil­dren’s vi­ta­mins, run­ning socks and charg­ing ca­bles. Con­tain­ers are yel­low be­cause it is the least com­mon colour of things sold on Ama­zon, so it is eas­ier to iden­tify items in the con­tain­ers.

On ad­ja­cent belts, card­board boxes of dif­fer­ent sizes race up and down lev­els, be­fore fall­ing into one of sev­eral hel­ter-skel­ter slides to be ar­ranged for ship­ping. Ma­chines print postage la­bels and stamp them on pack­ages in less than a sec­ond.

The ful­fil­ment cen­tre, known as BWI2 (they are named af­ter their near­est air­port’s code, start­ing up from one; Baltimore goes up to BWI6) is one of 175 around the world. It is Ama­zon’s sec­ond big­gest, and at one mil­lion square feet, is so vast that you can­not make out the other end.

Ama­zon has 3,000 “as­so­ciates”, the name for its ware­house staff, at the cen­tre. But soon, the hu­mans may be out­num­bered by ro­bots. Shuf­fling around the ful­fil­ment cen­tre, al­though sep­a­rated from work­ers by metal fences, are hun­dreds of orange, puck-shaped ma­chines.

The ro­bots, around the size of a car tyre, pick up four-sided pods that are stuffed with items such as ice packs, books and charg­ers, and trans­port them to be col­lected by a hu­man.

They do not get tired, or de­mand breaks or hol­i­day (hu­mans, by com­par­i­son, work 10-hour shifts, with two half-hour stops). They rarely make mis­takes, and are un­likely to sue the com­pany if they do.

The ro­bots rep­re­sent the fu­ture of the com­pany that has re­shaped the world of shop­ping. Since spend­ing $775m (£595m) on Bos­ton-based robotics com­pany Kiva in 2012, about 25 of Ama­zon’s ful­fil­ment cen­tres, in­clud­ing one in Manch­ester, have be­come robot-op­er­ated. It is now the de­fault for new ones: a cen­tre is be­ing built in Bris­tol.

The in­vest­ment in robotics is seen as one of Ama­zon’s key strengths as it grap­ples with an ex­plo­sion in on­line or­ders and shop­pers’ de­mands for near-im­me­di­ate grat­i­fi­ca­tion.

This week, the com­pany will re­port a boom in sales and prof­its. An­a­lysts ex­pect rev­enues in the third quar­ter of the year of around $57bn, up al­most a third year on year. This year shares have climbed 55pc, al­though they have fallen from the Septem­ber peak that pushed its value past one tril­lion dol­lars.

The com­pany has been seen as em­blem­atic of both the ben­e­fits and the down­sides of the mod­ern econ­omy. Ama­zon has granted un­told con­ve­nience to its cus­tomers. It’s chief ex­ec­u­tive Jeff Be­zos has be­come the world’s rich­est man, worth as much as $150bn.

But the com­pany’s suc­cess of­ten did not seem to be shared by its work­ers, at least those on the ware­house floor. Crit­ics claimed they were un­der­paid and made to en­dure a bru­tally ef­fi­cient work en­vi­ron­ment that left them ex­hausted and stressed. The robot revo­lu­tion, which many work­ers fear will take their jobs some­day, is hap­pen­ing apace in­side the Ama­zon ful­fil­ment cen­tre. How the com­pany han­dles that tran­si­tion may well be a marker for how the rest of the world fol­lows.

This month, Ama­zon sought to ease any fears that au­to­ma­tion will be bad for the rest of us. It an­nounced a pay rise for its work­ers, from a min­i­mum of $10 an hour to $15 in the United States, and from £8 to £9.50 in the UK.

An­a­lysts at Mor­gan Stan­ley said the pay jump, which will cost about $3bn, will be es­sen­tially paid for by ro­bots. “We think in­creased ful­fil­ment ef­fi­ciency is set to off­set the afore­men­tioned wage in­crease,” the an­a­lysts said in a note last week.

In non-roboto­cised ful­fil­ment cen­tres, Ama­zon’s work­ers walk along miles of shelves to find the right prod­uct. En­try-level jobs in­clude “stow­ers”, who put items that ar­rive from sup­pli­ers and other ware­houses on to the shelves, and “pick­ers”, who re­trieve the items from the shelves

‘I think there’s a myth that ro­bots de­stroy jobs; I don’t think that’s right, that’s not the Ama­zon ex­pe­ri­ence’

when a shop­per has or­dered them. But in ro­botic cen­tres, the shelves come to the work­ers. Pick­ers stand at their as­signed sta­tion, and a queue of ro­bots car­ry­ing pods full of hun­dreds of items line up to de­liver their goods.

Once an em­ployee has grabbed

what they need – a self-help CD, a bat­tery pack, a toy car – they place it in their as­signed bin to be de­liv­ered to an­other cog on the pro­duc­tion ma­chine. The robot moves on, let­ting the next one shuf­fle into po­si­tion. Once raided, the pods will join a dif­fer­ent line for a stower, who will stuff items back into their free space.

En­ter­ing the area can be dan­ger­ous for hu­mans: if they want to go into robot ter­ri­tory they must wear a newly de­signed belt that emits a sig­nal stop­ping any­thing nearby.

Ma­chine-vi­sion cam­eras and a smart spot­light sys­tem track work­ers’ hand move­ments, reg­is­ter­ing where they have placed items in a pod and di­rect­ing them to the next prod­uct to pick up. This year Ama­zon was granted a patent for a wrist­band that would track hand move­ments and vi­brate to ma­nip­u­late them, al­though it says it has no plans to in­tro­duce such a de­vice. The end re­sult is that Ama­zon runs a lo­gis­tics operation that is pos­si­bly un­matched for ef­fi­ciency, a key ad­van­tage in the re­tail wars.

Mil­lions of items are dis­patched from the BWI2 cen­tre ev­ery week. One picker at the Baltimore ware­house wears a T-shirt pro­claim­ing him to be a mem­ber of the “400 UPH” club, mean­ing he has picked more than 400 items per hour. Sta­tions carry tips on the “route to 350 UPH”.

These rates were never pos­si­ble when work­ers had to make the long walks be­tween shelves. John Fel­ton, the head of Ama­zon’s ware­house oper­a­tions, de­clines to quan­tify the pro­duc­tiv­ity in­crease of a robot ware­house, but one stower says his rates have tripled.

For Ama­zon’s cus­tomers, the up­shot is quicker de­liv­ery, more choice and lower prices. But what do they mean for work­ers? Should they fear be­com­ing ob­so­lete? Fel­ton says: “I think there’s a myth that ro­bots de­stroy jobs; I don’t think that’s right, that’s not the Ama­zon ex­pe­ri­ence.”

He points out that Ama­zon’s work­force has grown sub­stan­tially even as the com­pany has in­vested in ro­bots, and high­lights new jobs, such as the tech­ni­cians that main­tain the ro­bots. The point con­ve­niently ig­nores Ama­zon’s rapidly grow­ing per­cent­age of all shop­ping.

But none the less, there are many things that ro­bots can­not do. Iden­ti­fy­ing and grasp­ing items that come in an in­fi­nite ar­ray of shapes and sizes re­quires per­cep­tion and dex­ter­ity, which ro­bots still lack.

Ama­zon claims that its ro­bots are meant to make life eas­ier for hu­mans, not re­place them. “Hu­mans are so good at tasks that ro­bots are so far away from do­ing,” says Joe Quin­li­van, the chief op­er­at­ing of­fi­cer of Ama­zon’s robotics di­vi­sion.

Fel­ton says it is hard to imag­ine fully au­to­mated dis­tri­bu­tion cen­tres, at least not for sev­eral decades. But the ra­tio of ro­bots to hu­mans is only likely to go in one di­rec­tion. Mean­while, Ama­zon is en­cour­ag­ing its work­ers to sign up for schemes that will retrain them for the next gen­er­a­tion of jobs, from IT tech­ni­cians to soft­ware en­gi­neers.

“A lot of those jobs were not needed in the old ful­fil­ment cen­tres,” says Fel­ton. “We know that be­ing a picker might not be the ca­reer peo­ple want for the next 30 years.” A good thing too, be­cause it prob­a­bly won’t ex­ist.

Ro­bots now bring pods full of items, left, to hu­man pick­ers at Ama­zon’s ful­fil­ment cen­tres

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