Much of the buzz about Amazon’s surprise announcement yesterday that it is acquiring popular online shoe retailer Zappos for more than $900 million is about whether the Las Vegas-based company really needed to sell, or was pressured to do so by its main venture backer, Sequoia Capital. But the first thing I wondered when I heard the news was what the acquisition might mean for Kiva Systems, the Woburn, MA, startup whose robots staff a huge Zappos distribution center in Louisville, KY.

Zappos has been working with Kiva for almost two years, and the company’s shelf-toting robots, which help speed the process of order fulfillment, have been operating in the Louisville location for over a year. And in fact, the shoe seller recently ordered more Kiva gear to prepare for the holiday rush, says Kiva CEO Mick Mountz, whom I reached by phone this morning. “We don’t know anything more than what’s in the press right now, but our reaction is that this is a good thing for Kiva,” Mountz says. “They’re growing quickly, and growing their Kiva system to support that. If you take the press releases at face value, they are going to keep the two companies separate, and it’s all about growth. What that implies to us is that they’re going to need more Kiva equipment to keep doing that.”

Indeed, Zappos CEO Tony Hsieh said in an open letter to employees that the Louisville warehouse might even grow into a hub for Amazon’s own inventory. “As many of you know, we were strategic in choosing our warehouse location due to its proximity to the UPS Worldport hub in Louisville,” Hsiesh wrote. “Amazon does not have any warehouse locations that are closer to the Worldport hub. There is the possibility that they may want to store some of their inventory in our warehouse or vice-versa. Right now, both Zappos and Amazon believe that the best customer experience is to continue running our warehouse in Kentucky at its current location.”

Kiva’s whole mission is to help companies get products off the warehouse shelves where they’re stored and into boxes for shipment to consumers faster, using agile wheeled robots that carry the shelves to stock pickers. That means Amazon has always been one of Kiva’s dream customers—and now, thanks to the Zappos acquisition, it’s an actual one. “What that means to our business is that the number-one and number-two e-retailers are now using Kiva, the number two being Staples,” says Mountz.

E-commerce companies have been Kiva’s strongest customers lately, according to Mountz. “From where we sit, e-commerce is doing pretty well right now,” he says. “Diapers.com recently got some expansion gear from us. Quiet Logistics, which is supporting the Gilt Groupe, just purchased some additional gear.”

And if Amazon wants to keep expanding at its current rate, it’s going to have to look at warehouse automation technologies, Mountz believes. “If you look at their business, they are at $20 billion a year and growing at 5 percent. That means they need to add a billion dollars of capacity a year—that means opening one or two new distribution centers every year. Along those lines, the Zappos folks have plenty of space down in Louisville, and a great location next to the UPS Worldport hub, so if we had to predict, we’d think they’re going to end up using that building for even more beyond the growth Zappos has planned.” [Update: In a follow-up e-mail, Mountz noted that Amazon's recent growth rate has actually been closer to 15 percent or $3 billion in additional gross revenues every year.]

Meanwhile, Kiva is busy building and delivering the equipment Zappos needs for the holidays, Mountz says. “We have ongoing, project-level dialogue with Zappos every week, and we’ll just have to see what they learn over time,” he says. “We think Kiva is going to be a big part of their material handling as they go forward.”

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Visiting a warehouse equipped with Kiva Systems‘ robotic fulfillment technology is a spooky experience: the little orange robots scoot about in busy silence, toting shelves full of products to human pickers who move the right products into boxes for shipping. There are no grinding, beeping forklifts, and not even much conversation, since there are so few human workers. So it makes sense that the first company to specialize in outsourced fulfillment services using Kiva’s technology would be called Quiet Logistics.

The startup announced today that it has installed a Kiva fulfillment system at its Andover, MA, site and that the so-called “QuietCenter” is already handling orders for Massapequa, NY-based Internet retailer Music Parts Plus.

The Andover center is envisioned as just the first in a network of automated warehouses, each of which would handle fulfillment for multiple customers. The buzzword for this practice in the warehousing industry is “third-party logistics,” or 3PL, and it’s similar in spirit to the multi-tenant architecture offered by Software-as-a-Service companies such as Salesforce.com. But Quiet Logistics is the first 3PL company to use Kiva’s technology.

“We’re excited to see Quiet Logistics delivering on its vision,” Kiva CEO Mick Mountz said in today’s announcement. “Their 3PL multi-tenant model is the perfect platform for bringing the value of Kiva Systems material handling to customers who rely on best of breed service partners.”

Quiet Logistics said the online catalog at Music Parts Plus—a playground for guitar aficionados—contains over 5,000 separate products, from picks to lubricants. The company was growing so fast it could no longer manage its inventory efficiently, yet it’s too small to afford its own Kiva setup. So it turned to Quiet Logistics.

“Companies like Music Parts Plus want and need to focus their time and resource on their core capabilities such as merchandising and marketing,” Bruce Welty, Quiet Logistics’s CEO, said in the announcement. “We deliver the service they need to fulfill a customer’s order and expectations. We operate in the background rapidly, efficiently, accurately and above all quietly.”

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It may still be a while before robots can actually change diapers, but at least they can help move them around inside warehouses. That’s the word today from Kiva Systems, the Woburn, MA-based maker of “automated fulfillment systems”—i.e. fleets of squat orange robots designed to move shelves to human order pickers, rather than forcing workers to endlessly walk warehouse aisles. Online retailer Diapers.com plans to install Kiva systems at all three of its distribution centers, where they will “store, move and sort a variety of baby products, including diapers, wipes, formula, bottles and clothes,” according to a statement from Kiva.

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ThingMagic may sound like an oddly whimsical name for a company that makes some of the key hardware and software behind radio frequency identification (RFID) systems—machines that have serious real-world jobs like tracking the hundreds of thousands of products that pass through the dock doors of Wal-Mart warehouses and other distribution centers every day. But if you spend any time talking to the principals at the company, most of whom came out of Neil Gershenfeld’s physics and media group at the MIT Media Lab almost nine years ago, you’ll realize that for them, RFID technology is just a means to something bigger: an “Internet of things” where every common object or device is tagged with an electronic identifier and can wirelessly interrogate every other object, creating a real-time picture of everything passing through a given space.

That world, in turn, will need what Ravi Pappu, director of advanced development at ThingMagic, calls a “reality search engine”: a combination of sensors and software that can tell you at a moment’s notice whether you’ve got enough widgets in the warehouse to fulfill today’s orders, or whether all the tools you’ll need at the construction site are in the back of your truck, or who’s got the closest defibrillator, or where you left your other green sock. So even though ThingMagic is concentrating for the moment on fairly prosaic challenges such as making ever-smaller gizmos for reading RFID tags, “it’s the gravitational attraction of that [reality search engine] that makes me get up in the morning,” says Pappu.

On this particular morning, ThingMagic is taking its latest step toward the reality search engine, releasing a new device called Astra. It’s a flat, 10-inch-square box that includes both the computer hardware and the antennas needed to read RFID tags—which only give up the information stored on them when they get a big enough hit of radio energy— from up to 30 feet away. Designed to be placed in fixed locations in facilities such as offices and hospitals, Astra is about the same size as its predecessor, ThingMagic’s Mercury5 fixed RFID reader, except that the Mercury5 required massive external antennas in order to transmit sufficient radio power and hear the weak signals returned by RFID tags. By shrinking the reader hardware and taking advantage of improvements in RFID tag technology, ThingMagic was able to squeeze everything needed to detect RFID-tagged objects into a single box no bigger than a laptop computer, and power it all over a standard Ethernet cable.

“Before, you needed a lot of power to power up the tags, and also you needed a lot of isolation between the transmitter and the receiver,” Pappu explained to me when I visited him at ThingMagic’s radio lab in Woburn, MA, last week. “It was the same as you yelling at the top of your lungs while trying to listen to me whisper one kilometer away. Now the tags require lower power, and when you are transmitting at lower power you can hear yourself better.”

You can also use smaller antennas. Whereas the RFID assembly that ThingMagic sells to warehouses–the old Mercury5 reader plus two antennas—is a couple of feet wide and taller than a person, the Astra unit is so small that “you can just hide it in the ceiling and it creates this zone of RFID. That’s starting to approach the Internet of things.”

In a sense, then, Astra is a sign that ThingMagic is returning to its roots at the Media Lab, where Gershenfeld led a consortium called “Things that Think” that brainstormed technologies such as coffee makers that would recognize your cup and serve up your favorite blend. Pappu was one of five Media Lab PhD graduates (Bernd Schoner, Rehmi Post, Yael Maguire, and Matt Reynolds were the others) who formed ThingMagic as a consulting company in 2000. At first, the company worked on very “thingy” technologies such as electronic-ink-based price tags for retail shelving that could be rewritten remotely, and an RFID-driven device that would help consumers calibrate home medical devices such as glucose meters.

But gradually, the company drifted away from a focus on tracking discrete things used by individuals and toward the specialized field of supply chain management—that is, warehousing and distribution. Around 2002-2003, MIT’s Auto-ID Center was spearheading a global switchover from old-fashioned barcodes to a new product identification standard called the Electronic Product Code (EPC). ThingMagic built the world’s first EPC-compatible RFID reader, and licensed it to manufacturers such as ADT Sensormatic and Omron, who sold the devices for use in stores and warehouses.

By 2004-2005, when it looked as if companies like Wal-Mart were going to rebuild their supply chains around EPC and RFID technology, ThingMagic couldn’t resist the temptation to …Next Page »

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Kiva Systems may be winning its battle against the science-fiction robots.

The Woburn, MA, company is a newcomer to a hidebound business. It builds “mobile fulfillment systems” that are overturning all the traditions of warehousing by making the shelves move around, rather than the people. The moving is done by squat wheeled robots that maneuver under the shelves, pick them up, and trundle them over to a person at a picking station, who grabs whatever items are needed to fulfill the next order and boxes them up to be shipped to a retail store or a mail-order customer.

It’s amazing to watch dozens of these little orange robots working in concert, lifting and spinning and scooting without once colliding or spilling anything. (For a lighthearted look at Kiva’s system in action, see this YouTube video of the robots dancing the Nutcracker ballet.) But warehousing is a centuries-old industry in which the last major innovation was the forklift. Convincing a warehouse manager that he should hire a fleet of R2-D2s to staff his next facility is a tough sell.

“If you just go to the people who run these factories and warehouses and say ‘We’re going to have a bunch of robots help your workers,’ they are going to say ‘Obviously this is an East Coast pointy-head who doesn’t understand what a real warehouse is like,” says Mitch Rosenberg, Kiva’s vice president of marketing. To them, the word “robot” is likely to evoke visions of Robbie the Robot from Lost in Space. But show these same people a Kiva warehouse in action, Rosenberg says, and they start to understand the practical potential, he says—including potential productivity increases on the order of 200 to 300 percent.

There’s certainly room for improvement in an industry where most pick workers spend hours each day walking up and down miles of warehouse aisles. This isn’t a terribly efficient process, as online grocer Webvan learned the hard way. After raising some $800 million in venture capital, the onetime dot-com darling went bust in 2001 because—among other things—it never found a low-cost way to fulfill orders.

After all, if every customer’s order sends a pick worker scurrying around a warehouse just as if they were at the supermarket, most of the fabled efficiencies of Internet-based commerce shrivel away. “When you go grocery shopping, what percentage of the time are you actually putting what you’re looking for into your basket?” asks Rosenberg. “Most of the time you’re just walking and waiting to encounter it.”

It’s recognizing and grabbing items that supermarket shoppers—and warehouse stock-pickers—are really good at. Webvan executive Mick Mountz realized that if he could somehow make the bins full of stock come to the pick workers, rather than sending the workers to the bins, the humans in a warehouse would be able to spend more of their time being smart and less just walking around.

The idea came too late to save Webvan. But after the company folded, Mountz went enlisted Raffaello D’Andrea, an expert on automatic controls at the Swiss Federal Institute of Technology, and Peter Wurman, a computer scientist at North Carolina State University, to help him put the concept into action. The result was Distrobot, founded in 2003. (The company changed its name to Kiva Systems in 2005.)

The system Wurman, D’Andrea, and CEO Mountz have now spent five years perfecting is as much about software as it is about robots. A master inventory database knows which shelves in a warehouse hold which items. When an order comes in at the Staples warehouse for a box of green pens and a ream of paper, the system wirelessly instructs two robots to find the appropriate shelves, pick them up (a platform atop a large screw lifts up the shelf a couple of inches as the robot spins underneath), and carry them to a designated stock-picking station.

If both units arrive at the same time, the system tells one robot to wait until the other moves out of the way. The robots have infrared sensors to warn of nearby objects—but collisions are unheard of, because the units are continually reporting their positions to the master system. They keep track of their own locations by watching for small bar code stickers attached to the warehouse floor.

At the station, a laser pointer shows the stock-picker where to look for the green pens or the paper. The worker grabs the needed item out of the indicated bin, places it into a box, and punches a button to let the system know the action is done. When the whole order is assembled, the box coasts off to the …Next Page »

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