Amazon's automation drive could reshape global logistics and workforce

According to recent news reports, ecommerce giant Amazon is doubling down in its drive to automate logistics and warehousing operations. One end result would be deep cuts in the workforce. It is also reported to be reducing 30,000 corporate jobs. Amazon aims to automate 75 per cent of operations, with warehouses employing few humans. Amazon currently has around 1.55 million employees and it expects to double the volume of its ecommerce operations by 2033. Automation would enable it to save around 30 cents on fulfilment of every item it delivers. According to the reports, this would reduce its workforce needs by around 160,000 employees by 2027 and obviate the need to make 600,000 new hires by 2033. The projected savings would amount to over $12 billion over time. 

The company has responded to the news report with a statement that these are projections made by only one division (its robotics division) and they are not necessarily correct. It has also stated it would make around 250,000 new hires for the 2025 Christmas period alone. But those hires may be temporary. An analysis by Morgan Stanley broadly concurs with the reported projections. Amazon cut 27,000 jobs in 2022 and 2023, and recently announced another 1,500 global job cuts in its human resources division. Its automation drive would transform not just its own workforce, but reshape the entire logistics industry. Warehouses, once a backbone of mass unskilled employment, may soon become robotic ecosystems managed by algorithms with very few human workers. Amazon has been looking at robotic automation since 2012, when it bought robotics maker Kiva for $775 million. Last year, the company launched its most advanced warehouse in Shreveport, Louisiana, where around 1,000 robots process packages with near-zero human involvement. This facility requires 25 per cent less in the way of workforce than in other warehouses that are less automated and it is expected to cut workforce by another 25 per cent as operations settle down and become more efficient. Reports say Amazon plans to implement this model in about 40 other facilities by the end of 2027. 

Amazon is the second-largest employer in the United States (after Walmart) and its distribution centres have pioneered the use of robotics and electronic tracking. Logistics giant UPS has a similar “Network of the Future” programme, using automation to eliminate up to 80 per cent of warehouse labour at over 200 facilities. The new model will, therefore, lead to a sharp reduction in workforce across the logistics industry. It is likely to be adopted globally across companies with similar needs. In India, for example, the fast-growing quick-commerce industry, as well as standalone logistics firms, courier companies, among others, will all be looking at the Amazon-UPS model. Advances in robotics and artificial intelligence may thus eliminate the need for large workforces deployed across these spaces and this looks especially dire for India’s vast, under-skilled workforce. The path to salvation may be gigantic upskilling programmes, which enables the workforce to find employment in areas where robotics and AI have not yet started to eliminate the need for humans. Policymakers will have to turn their attention to this.